A Global Financial Markets Infrastructure Business

Home , UK Financial Investments, Xavier Rolet

A global financial markets infrastructure business

Annual Report 31 December 2019 LSEG Who we are London Stock Exchange Group is a global financial markets infrastructure business. We provide valuable services for a wide range of customers, focusing on Data and Analytics, on Risk, Collateral and Processing Solutions, and on Capital Formation and Trade Execution.

Further information on London Stock Exchange Group can be found at: www.lseg.com London Stock Exchange Group plc 10 Paternoster Square London EC4M 7LS Telephone: +44 (0)20 7797 1000 Registered in England and Wales No. 5369106 Our vision Contents To become the leading global financial markets infrastructure group. STRATEGIC REPORT An overview of our business, our strategy and the markets and regulatory environment in which we operate, including statements from our Chair and CEO, Our purpose followed by more detail on each of our divisions, our performance, how we consider our wider responsibilities and the principal risks that could affect our business. We support global financial stability Sign-off for the Strategic Report is provided in the and sustainable economic growth by Directors’ Report on page 132. Highlights 2 enabling businesses and economies Chair’s statement 4 CEO’s statement 6 to fund innovation, manage risk What we do – our business model 10 Overview of Group activities 12 and create jobs. Market trends and our response 14 Strategy in action 21 Executive management team 24 Segmental review 26 Information Services 27 Post Trade Services – LCH 30 Post Trade Services – CC&G and Monte Titoli 33 Capital Markets 35 Technology Services 39 Supporting sustainable growth 40 Board engagement with stakeholders 51 How the Board has complied with Section 172(1) of the Companies Act 2006 52 Financial review 53 Principal risks and uncertainties 60

GOVERNANCE An introduction to our Board of Directors, our approach to corporate governance, the reports of committees of the Board and how we reward performance, along with other statutory and regulatory information.

Board of Directors 75 Corporate governance 78 Complying with the provisions of the Code 85 Report of the Nomination Committee 88 Report of the Audit Committee 90 Report of the Risk Committee 96 Directors’ Remuneration Report 98 Directors’ Report 129 Statement of Directors’ responsibilities 133 Independent Auditor’s Report to the members of London Stock Exchange Group plc 134

GROUP FINANCIAL STATEMENTS Detailed financial information setting out our performance for the reported 12 month period and financial position at year end.

Consolidated income statement 143 Consolidated statement of comprehensive income 144 Balance sheets 145 Cash flow statements 147 Statements of changes in equity 148 Notes to the financial statements 150

SHAREHOLDER INFORMATION A glossary of terms used in this report and other information for shareholders.

Glossary 204 Investor Relations and financial calendar 207

London Stock Exchange Group Annual Report December 2018 Highlights

The figures in the graphs below are for the Group on a continuing basis, so exclude businesses classified as discontinued during the periods shown. Percentages are based on 2019 compared with 2018.

Total income Adjusted operating proﬁt* £ m £ m 2,314 1,065 2,135 1,955 931 1,657 +8% 812 +14% 1,419 686 585

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Operating proﬁt Adjusted basic earnings £ m per share (pence)* 751 738 200.3 626 173.8 (2%) 148.7 +15% 124.7 404 427 103.4

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Basic earnings Dividends per share (pence) per share (pence) 153.6 70.0 138.3 60.4 119.5 (14%) 51.6 +16% 43.2 74.8 36.0 63.8

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

The graphs show full 12 month figures on a December year-end basis. There have been no businesses classified as discontinued during 2019 or 2018.

12 months to 12 months to Year ended 31 December 31 December 2019 31 December 2018 Total Variance Total income £2,314m £2,135m 8% Adjusted operating profit1 £1,065m £931m 14% Operating profit £738m £751m (2%) Adjusted profit before tax1 £994m £865m 15% Profit before tax £651m £685m (5%) Basic earnings per share 119.5p 138.3p (14%) Adjusted basic earnings per share1 200.3p 173.8p 15% 1. London Stock Exchange Group uses non-GAAP performance measures as key financial indicators as the Board believes these better reflect the underlying performance of the business. As in previous years, adjusted operating profit, adjusted profit before tax and adjusted basic earnings per share all exclude amortisation and impairment of purchased intangible assets and goodwill and non-underlying items

London Stock Exchange Group plc 2 Annual Report 31 December 2019 Strategic Report Highlights

Group Total Income by segment

12 months to 31 December 2019 £m Information Services 902 Post Trade Services LCH 756 Post Trade Services CC&G and Monte Titoli 152 Capital Markets 426 Technology Services 66 Other 12 2,314

LSEG produced a good financial performance with Post Trade Services – CC&G and Monte Titoli revenue growth in all core business divisions as the ––Income up 5% to £152 million Group continued the successful execution of its (2018: £145 million) on a reported basis and by 6% on a constant currency basis strategy. Key headlines are provided below: ––Net Treasury Income up 14% to £49 million (2018: £43 million), and up 15% on a constant currency basis Information Services ––Notional cleared for fixed income products rose 26% to ––Revenue up 7% to £902 million (2018: £841 million) on a reported €25 billion (2018: €20 billion) basis, and up 5% on organic and a constant currency basis ––Number of equity and derivative contracts cleared 2019: ––FTSE Russell revenues up 10% to £649 million (2018: £592 99.5 million (2018: 111.9 million) million), and up 6% on a constant currency basis ––2017-2019 target for FTSE Russell double-digit revenue growth Capital Markets each year, achieved in 2019 with 10% ––Revenues up 5% to £426 million (2018: £407 million) on both a reported basis and constant currency basis ––ETF assets benchmarked to FTSE Russell indices at the end of 2019: US$765 billion (at end of 2018: US$606 billion) ––Primary Markets revenue increased by c.£32 million in H1 2019 due to a one-off change in estimate relating to IFRS 15. Adjusting ––Launch of the Climate WGBI, based on risk modelling from for this, Primary Markets revenue for the year rose 6% Beyond Ratings, a business acquired in the year ––109 new companies joined our markets in the year (2018: 176) Post Trade Services – LCH ––Capital raised by new and further equity issues 2019: £23.4 billion ––Income up 14% to £756 million (2018: £662 million) (2018: £28.7 billion) ––LCH 2017-2019 target for c.50% adjusted EBITDA margin ––UK cash equity average daily value traded decreased by 18% achieved, with 54.9% margin for 2019 to £4.7 billion ––2017-2019 target for LCH OTC double-digit revenue growth each ––Borsa Italiana cash equity average daily number of trades year, achieved in 2019 with 15% decreased by 10% to 255,000 ––Net Treasury Income for LCH in 2019 increased by 18% to £206 ––Turquoise average daily value traded decreased by 36%, million (2018: £175 million) on a reported basis and up 17% on a Turquoise Plato Block Discovery value traded increased 11% to constant currency basis €103 billion (2018: €93 billion) ––SwapClear total notional cleared surpassed US$1.2 quadrillion, up Technology Services 14%, with client trades cleared up by 13% to 1.7 million and Note: Organic growth is compression up by 19% to US$920 trillion ––Technology revenue up 2% to £66 million (2018: £65 million) calculated in respect of on a reported basis and up 1% on a constant currency basis businesses owned for at least ––ForexClear launched clearing for deliverable FX forwards. 12 months in either period and Membership increased to 34 (2018: 32) ––Millennium’s Post Trade product selected by the Securities so excludes Beyond Ratings. Clearing Corporation of the Philippines to improve its post The Group’s principal foreign ––RepoClear saw record nominal cleared with €106 trillion cleared in exchange revenue exposure trade processes arises from translating our 2019, an increase of 7% from 2018 and successfully consolidated European based Euro and US a large majority of Euro debt clearing into LCH SA ––Successfully implemented Millennium Exchange and Millennium based USD reporting Surveillance platforms for the Johannesburg Stock Exchange businesses into Sterling

London Stock Exchange Group plc Annual Report 31 December 2019 3 Chair’s statement

“The Group plays a significant role in financial markets globally”

Don Robert Chair

Overview HKEX It was a great honour to be asked to serve as Chair of London Stock In September, LSEG received an unsolicited approach from Hong Exchange Group, an iconic institution with a 300-year history at Kong Exchanges and Clearing Limited (HKEX). LSEG’s Board had the heart of global financial markets. I would like to extend my fundamental concerns about the key aspects of the Conditional appreciation to the previous Chair for handing over the reins Proposal: strategy, deliverability, form of consideration and value, to a Group that is well positioned strategically and financially. especially when compared to the significant value we expect to The Group continues to perform well with total income up 8%, create through our planned acquisition of Refinitiv. Accordingly, adjusted earnings per share up 15% and a proposed dividend the Board unanimously rejected the Conditional Proposal, which of 70.0 pence per share, up 16%. HKEX subsequently withdrew.

2019 has been characterised by macroeconomic and political Governance uncertainty. The challenges posed to all business leaders The Board seeks to operate to high governance and ethical throughout the year have been numerous, but LSEG remains standards. Further detail is available later in the Board’s Corporate well positioned with a set of highly complementary businesses Governance report starting on page 78. Dominic Blakemore joined across the capital markets lifecycle. Our Open Access philosophy the Board as a Non-Executive Director, effective 1 January 2020, and customer partnership approach continues to be a true and we also welcomed Cressida Hogg to the Board as an Independent differentiator and fundamental to our business strategy. As a Non-Executive Director in March 2019. Following the conclusion systemically important business, the Group plays a significant of the Group’s AGM in April 2020, Paul Heiden will step down from role in financial markets globally, contributing to financial the LSEG Board and Dominic will assume the Chair of the Audit stability and supporting sustainable economic growth. Committee from Paul, and Stephen O’Connor will become the Senior Independent Director. I would like to record the Board’s Refinitiv gratitude to Paul Heiden for his significant contribution to LSEG LSEG announced the proposed acquisition of Refinitiv on over the last decade during which the Group has delivered 1 August 2019. This was the culmination of many months of significant growth and diversification. His counsel and experience strategy development, deep consideration and discussion. It is have been invaluable during this period of transformational change. a transformational transaction, strategically and financially. The combined global business will be headquartered and In October, David Warren, Group Chief Financial Officer informed domiciled in the UK with a premium listing in London. The the Group of his intention to retire from the company and step transaction received overwhelming shareholder approval in down from the Board. The Board is grateful for the key role David November, and we are currently engaged in the regulatory has played in the successful growth, diversification and global approvals process and integration planning. The transaction expansion of our business over the last seven years as well as for his remains on track to close in the second half of 2020. leadership when he served as Interim CEO. David will continue in his current role as Group CFO and a member of the Board through the close of the Refinitiv transaction to ensure a smooth transition to his successor. LSEG is undertaking a global search for his replacement, which is being led by the Board’s Nomination Committee.

London Stock Exchange Group plc 4 Annual Report 31 December 2019 Strategic Report Chair’s statement

Full year dividend Final dividend of 49.9 pence per share to be paid on 27 May 20201 (2018: 43.2 pence per share)

2019 70.0p

2018 60.4p

2017 51.6p

2016 43.2p

2015 36.0p

Dividend policy We operate a sustainable, progressive dividend policy, aiming to operate in a target range of 2.5–3.0x dividend cover. LSEG has operated within the target dividend cover range since 2015.2

1. Subject to shareholder approval at our AGM 2. Ratio of earnings per share divided by dividend per share

Culture Our LSEG Foundation donated £1.4 million in 2019 to various The Board, along with the executive team, seeks to promote a global and regional charities around the world. The Group also culture of Group-wide collaboration and customer focus. LSEG has continues to encourage employees to donate their skills and time made good progress this year on these efforts, which you can read to support disadvantaged young people in the communities in about further on page 44. The Board has also engaged directly with which we operate. employees, with candid feedback provided to Directors through a series of informal meetings, as well as more formal interaction with Summary employee forums, which will continue in the coming year. Since becoming Chair in May 2019, I have been impressed by the calibre and focus of our employees. I’d like to thank them for their Corporate Sustainability dedication and professionalism during what has been a very busy The global transition to a more sustainable economy continues to year. I would also like to thank my Board colleagues for their be a focus across our industry. LSEG has many touch points with support, challenge and for their commitment. London Stock stakeholders that put us in a strong position to engage in this Exchange Group is in a position of strength, sitting at the heart discussion and we take our responsibility seriously. Our ability to of international financial markets, as we look ahead to the many help facilitate change is demonstrated through the diverse opportunities within our industry. I look forward to working with ecosystem of sustainable bonds listed on our markets with issuers the Board and the executive team to continue to develop the from 18 different countries and bonds issued in 17 different business for the future. currencies. FTSE Russell has also launched an innovative new index providing a forward-looking assessment of the climate risk faced Don Robert by sovereigns allowing investors to reduce climate risk and Chair greenhouse gas emissions in their portfolios. 28 February 2020

As a global company, we are committed to playing our part, building on our engagement with UK Government initiatives such as the Green Finance Taskforce, which led to the creation of the Green Finance Institute, and the EU’s High Level Expert Group and Technical Expert Group. Both of these groups included representatives from LSEG as part of their work to develop recommendations for the EU’s Green Finance Taxonomy. Within LSEG, our Environmental Management Group continues to work on delivery of ambitious targets to improve our environmental efficiency year on year. Full details can be found later in this report on page 47.

London Stock Exchange Group plc Annual Report 31 December 2019 5 CEO’s statement

“The Group remains well positioned for future growth in this evolving environment.”

David Schwimmer CEO

Overview LSEG is looking to drive that evolution and position the Group for 2019 was another eventful year of macroeconomic and long-term sustainable growth. In August 2019 we announced the geo-political events directly influencing global financial markets. transformational acquisition of Refinitiv in an all-share transaction Despite this complex backdrop, it was also another strong year for an enterprise value of approximately US$27 billion, as at for London Stock Exchange Group – delivering a strong financial 1 August 2019. The proposed acquisition, which has been well performance; making meaningful progress executing on our received by the market and approved by shareholders, significantly strategic objectives; and taking significant steps on a number of accelerates our existing strategy to be a leading global financial Group-wide initiatives. We announced the proposed acquisition markets infrastructure provider. Refinitiv brings highly of Refinitiv, which will accelerate our strategy, while continuing complementary capabilities in data, analytics and capital markets to progress financially, strategically and operationally across our as well as deep customer relationships across a truly global core businesses of Information Services, Post Trade and Capital business. As a result, we will significantly expand our data and Markets. Our successful strategy is underpinned by the analytics offering to create a global multi-asset class capital continuation of our Open Access and customer partnership markets business. Shortly after the announcement of the proposed approach to deliver innovative solutions across the financial Refinitiv transaction, we received an unsolicited approach from markets value chain. Hong Kong Exchanges and Clearing Limited (HKEX). As noted in the Chair’s statement on page 4, the Board reflected fully on the At the end of 2018, the Board and the executive team evaluated conditional proposal and highlighted fundamental concerns about the Group’s strategy in order to ensure that LSEG is well positioned the deliverability, value and strategic benefit of the approach. HKEX for the decade ahead. We carried out this evaluation from a position later announced that it would not proceed with an offer. The Board of strength, building on the successful execution of the strategy remains convinced that the Refinitiv transaction provides superior and financial performance of recent years. Over the last 20 years, benefits, and we continue to make good progress towards the financial market landscape has changed significantly – driven by achieving regulatory approvals. We remain on target to close the technology, regulatory and macroeconomic factors – and change transaction in the second half of 2020. is happening at an even greater pace today. We are consistently hearing from our clients that they want to trade across different regions and asset classes, with fewer providers that are better positioned to do more for them across the financial markets value chain, while maintaining an open access model built on customer choice.

London Stock Exchange Group plc 6 Annual Report 31 December 2019 Strategic Report CEO’s statement

Information Services Post Trade In our Information Services division, FTSE Russell is a key The Group’s post trade divisions continued to perform well. LCH 12% contributor to Group revenues, delivering 10% revenue growth over delivered a strong performance with income up 14% to £756 million. Rise in FTSE Russell the course of the year. This included strong growth in subscription Post Trade – Italy saw income increase by 5% to £152 million. In subscription revenues revenues, up 12% in 2019, reflecting new sales across a number January 2019, LSEG also announced the purchase of a 4.92% of indices. minority stake in Euroclear, a leading provider of settlement, custody and collateral management services across Europe, which further The growth in passive investing continues and is now increasing at strengthened LSEG’s and Euroclear’s existing operational and approximately 20% per year with assets expected to reach US$30 commercial relationship to the benefit of our respective customers. 15% trillion by 2023. FTSE Russell is well placed to captitalise on these Revenue increase in industry trends, with increased demand for its data and analytical LCH’s OTC clearing services continued to set new records in 2019 LCH OTC clearing tools. At the end of 2019, the value of ETF assets tracking its indices and have seen good growth in member and client clearing. was US$765 billion, up 26% on the previous year. SwapClear remains the largest OTC rates liquidity pool in the world, processing over US$1.2 quadrillion in notional volume in 2019. LSEG’s Information Services business is also responding to the Alongside this, the increased use of its compression services has rapidly growing demand among asset owners to integrate enabled members and customers to save approximately US$35.1 sustainability and Environmental, Social and Governance (ESG) billion in capital over the course of the year. In October, LCH became considerations. In June, we announced the acquisition of Beyond the first clearing house to offer clearing of Euro-denominated swaps Ratings, a highly regarded provider of ESG data for fixed income. benchmarked to the new reference rate €STR, as the industry Beyond Ratings is very complementary to FTSE Russell’s existing adopts new interest rate benchmarks. The move follows its launch ESG index and data offering as well as the analytics tools provided of clearing for SOFR swaps and SONIA Futures in 2018, and SARON through The Yield Book. swaps in 2017. Through SwapAgent, LCH has the opportunity to expand its offering in the non-cleared OTC derivatives space, which In July, FTSE Russell launched the first climate risk-adjusted represents around 25% of the global OTC interest rate derivatives government bond index, which allows the market to access a market. ForexClear has also expanded its product offering to include quantitative climate risk assessment for sovereign debt. FTSE the clearing of deliverable FX forwards. In Italy, the Group’s central Russell has worked with institutions across the globe to develop securities depository (CSD), Monte Titoli, is implementing a digital indices that meet their sustainability criteria as well as the underlying transformation programme to deliver increased efficiency, risk benchmarks for exchange traded funds. FTSE Russell will continue reduction and simplification for clients. to help develop and promote more global standards for measuring progress against ESG and sustainable development goals. In October, we announced that we would align our Post Trade businesses in one division from January 2020, under the leadership FTSE Russell successfully began inclusion of China A Shares and of Daniel Maguire. The new Post Trade division includes LCH Group, Saudi Arabia securities into its global equity benchmarks, marking CC&G, Monte Titoli and UnaVista, our trade reporting business that significant developments for these emerging markets. We have previously sat within Information Services. The new division will received positive feedback from index users with many passive ensure greater Group-wide collaboration and benefits for customers, asset managers moving quickly to adjust portfolios. We estimate while continuing to operate on an open access basis with no changes that the inclusion of these countries within the FTSE Emerging to local legal entity governance and regulatory oversight. Index will equate to around US$15 billion in net passive inflows of assets under management. The withdrawal agreement in relation to the UK’s departure from the European Union provides for a transition period until 31 December 2020 during which the UK will continue to apply European Union law. As such, LCH Ltd remains an EMIR ‘Authorised’ UK CCP and continues to offer clearing for all products and services to all members and clients. LCH Ltd also continues to engage in the application process under the revised supervisory framework for EU and third country CCPs (EMIR 2.2) to ensure a smooth transition to being a recognised, third country CCP.

London Stock Exchange Group plc Annual Report 31 December 2019 7 CEO’s statement (continued)

Capital Markets LSEG continued to support issuers and investors in the transition to £23.4 Capital Markets continued to perform well despite macroeconomic a sustainable, low-carbon economy throughout 2019. Over a third headwinds with revenue up 5% to £426 million. of the £6.9 billion total capital raised by investment funds through billion IPOs and further issues this year has been raised by green funds. Total raised by new While IPO activity globally has been slower this year due to Borsa Italiana’s third Italian Sustainability Day welcomed a record and further issues macroeconomic and political uncertainty, London Stock Exchange number of participants amidst the growing focus on sustainable on our markets and Borsa Italiana attracted significant listings with a total of investment. In October, London Stock Exchange launched two £23.4 billion raised by firms in new and further issues across the green initiatives to recognise the increased interest from issuers Group’s markets. London Stock Exchange retained its status as the and investors. The new Green Economy Mark recognises listed leading European exchange in terms of money raised and Borsa companies with 50% or more of their revenues derived from Italiana recorded the highest number of new listings in Europe. products and services that contribute to the global green 31 economy. The Sustainable Bond Market builds on the success of New issues AIM, which will celebrate its 25th anniversary in 2020, remains the Green Bond Segment, launched in 2015, and includes new on AIM Italia the world’s largest growth market, helping firms to raise over sustainability, social and issuer-level segments, based on £3.8 billion in new and further issues during 2019. As part of our independently verified frameworks and use of proceeds. ongoing commitment to broadening our services to help make markets more accessible, London Stock Exchange also signed an CurveGlobal, the interest rate derivatives business, continued to agreement with PrimaryBid to enable retail investors real time innovate and build momentum. CurveGlobal trading volumes rose access to listings. AIM Italia welcomed 31 companies to its by 78% in 2019, compared to 2018, as it continues to drive markets, the highest number since it launched in 2009. In fixed competition in the futures markets. CurveGlobal is supporting the income, a number of companies and sovereign issuers chose transition away from LIBOR-based derivatives, enhancing price London to raise capital, including Aramco’s inaugural international discovery and helping the market manage risk. It has also US$12 billion bond in April. introduced a unique uncapped pre-paid trading scheme to encourage further use of CurveGlobal services. After four years of development, including close work with the UK and Chinese Governments and regulators, we launched Shanghai- London Stock Connect, welcoming Huatai Securities as the first “LSEG continued to support issuer of GDRs on the new segment in June. While we expect it will take a while to build, it is a significant achievement in our issuers and investors in the relationship with China. transition to a sustainable, low-carbon economy throughout 2019.”

London Stock Exchange Group plc 8 Annual Report 31 December 2019 Strategic Report CEO’s statement

Leadership Our purpose During the course of the year, we announced some changes to LSEG supports global financial stability and sustainable economic strengthen further our executive management team. David growth by enabling businesses and economies to fund innovation, Shalders joined the Group as Chief Integration Officer and Chief manage risk and create jobs. As a global financial markets Operating Officer and Anthony McCarthy was appointed Chief infrastructure business, LSEG provides critical services to clients Information Officer, following Chris Corrado’s decision to leave the around the world. We understand the vital role we play in supporting Group. As noted in last year’s report, Waqas Samad was appointed and enabling a financial ecosystem that fosters long-term sustainable Group Director, Information Services in January 2019, while Daniel economic growth, for the benefit of all participants in capital Maguire, CEO LCH Group was appointed Group Director, Post Trade markets – issuers, investors and intermediaries. We run businesses following the creation of a single Post Trade division. Tim Jones, that are of systemic importance and recognise that in doing so we Group Head of Human Resources, and Gavin Sullivan, Group hold an important position in the financial ecosystem with a broad Communications Director, both joined the executive management set of responsibilities to our stakeholders. team from 1 January 2020, reflecting the importance of these roles as the Group continues to develop. From 1 April 2020, Murray We are also cognisant of our responsibilities to our people and to Roos will join LSEG as Group Director, Capital Markets as Raffaele the wider communities in which we operate. We are committed to Jerusalmi steps down from that role, while continuing as CEO, supporting a culture of collaboration and embracing the diversity Borsa Italiana. of the Group. In 2019, we launched our Inclusion Network (IN) which will support networks embracing all forms of diversity. Finally, in October we announced that David Warren, Group Chief Colleagues in all locations have actively supported cultural initiatives Financial Officer had informed the Group of his intention to retire from mentoring to organising activities that promote our values. from the company. David will continue in his current role as Group It is also encouraging to see a rise in the number of colleagues CFO and a member of the Board through to the close of the participating in our paid volunteering days initiative to support Refinitiv transaction to ensure a smooth transition to his successor. various local charities around the world. You can read more in our However, I would like to express my thanks now for David’s separate Corporate Sustainability report available on our website significant contribution to the Group’s success. and in the supporting sustainable growth section of this report from page 40.

“We have continued Looking forward We keep a close eye on the broader macroeconomic, technology to invest across our and regulatory factors which continue to drive change in our industry. We have continued to invest across our businesses, businesses, working working in partnership with customers to deliver innovative products and services, while also controlling costs. The Group in partnership with remains well positioned for future growth in this evolving customers.” environment as a global financial markets infrastructure leader. Finally, I would like to take the opportunity to thank all colleagues across the Group for their hard work in delivering another successful performance.

David Schwimmer CEO 28 February 2020

London Stock Exchange Group plc Annual Report 31 December 2019 9 What we do – our business model

LSEG is a global financial markets infrastructure business that How we add value operates a number of leading businesses serving a global LSEG operates through three main interconnected business divisions (i) Information Services customer base including: (ii) Post Trade and (iii) Capital Markets, each supported by Technology Services which provides technology solutions to both the Group and customers around the world. Our presence across ––A global multi-asset index business with US$15 trillion in AUM the financial markets value chain enables us to provide a platform for serving customers across and US$765 billion ETF AUM benchmarked to our indices multiple activities, meeting a wide range of their needs. ––A global OTC clearing house with over US$1.2 quadrillion of notional value cleared in 2019 Information Services Post Trade Capital Markets ––European trading venues with over £435 billion average Creates global and Provides clearing, settlement Operates a broad range of daily value traded in 2019 multi-asset class and regulatory reporting international equity, ETF, fixed indices, analytics and services to support clients’ income and derivatives data solutions, which risk and balance sheet markets, which connect The Group plays a vital economic and social role within the global support clients’ management, regulatory businesses and investors with economy by enabling companies to access funding for growth and investment and capital reporting and capital access to capital markets and development and allowing investors to make informed investment allocation decisions, efficiency. Enables enables companies to grow and decisions and manage financial risk, supporting the generation of trading and valuations increased trading and develop. Our secondary markets investment activity provide liquid and deep wealth and the creation of jobs. access to financial securities to enable improved price Headquartered in the UK, the Group has significant operations formation, transparency around the world including France, Italy, North America, Romania and trading efficiency and Sri Lanka employing approximately 5,000 people. Technology Services

From January 2020, we aligned our Post Trade businesses in one Delivers financial markets infrastructure IT to various businesses within the Group. This IT division. The new Post Trade division includes LCH Group, CC&G, comprises resilient, secure, and high performing trading platforms, post trade platforms, Monte Titoli and UnaVista, our trade reporting business that real time market data, hosting and other infrastructure products and services. It also provides these services to third parties around the world. previously sat within Information Services. For the purposes of this report, reviewing 2019 performance, UnaVista’s results are included within Information Services.

Our activities across the financial markets value chain

t data Pos asse t Tra lti- de mu ser ry vic ta es rie en op ab pr le g o in p t er ra a e t n io e n g a , l s e t f e FX ﬁ k & W r e or c m Re k i a co po ﬂo e ts rt w n m in e in rk g & c t d a S xe M o y n i lu , e F t r r io i a n s k p

s a n & n a R d r n p i o ro s t i c k b t n e , a o s a d i s c t o l n m i r u n l a a c l g n o a f e & d s t c g l x i o e S e C e & n a r u l e i t u a l s e e s s i t q

i l h t t i d a e p

l i l i a &

e r a e Group Technology o

t a

r i

R e

e m

& Operational g s

a i

E Excellence

a n p

a e n

g e

e u

D s n g a

ta ic t

n & lyt i Ana

d g a

r in T k ar D m at ch cs Re a & n ti se , Be ly ar dex na ch In & A

SEDOL / LEI D at s a a on nd isi an dec aly ent tics e stm nable trading and inve

London Stock Exchange Group plc 10 Annual Report 31 December 2019 Strategic Report What we do – our business model

What makes us different from our competitors What we need to operate our businesses and deliver value Need help? Our Open Access and customer partnership approach Key aspects of our business that we continue to invest in and develop Like any industry, global financial markets differentiates us from our competitors, allowing our customers to help deliver our services and create value for our customers. infrastructure has its own to engage with LSEG in a way that best suits their needs. unique language. For that Data and analytics reason, we have included a glossary on pages 204–206. Open Access Our proprietary content, IP and our data and analytical capabilities ––Open Access is the principle that lies at the heart of free and fair enable us to create value-add products, and the data which we Capital allocation markets, and is enshrined in MiFID II generate is used by customers to improve workflow and create framework A description of our capital insight to inform risk, trading and investment strategies. ––We believe that customers should have the choice of where they allocation framework is available on page 59. place their business and therefore we do not operate a vertically Risk management integrated model. In particular, we support non-discriminatory The management of risk is fundamental to maintaining our role as access to trading and clearing infrastructures as we believe this a diversified global financial markets infrastructure provider in provides greater market efficiencies by reducing fragmentation order to maintain stakeholder confidence. and barriers to service uptake ––We provide access to all our markets and products for a wide range Technology & operational excellence of users, including those institutions that offer competing services We are committed to investing in our technology and operational to the Group. Access to our markets and products is not conditional infrastructure in order to enhance our stability, resilience and on taking other services from LSEG effectiveness as a business such as our Group-wide investment in migrating our businesses to the Cloud. Through our Technology ––This helps to ensure that customers have the power and Services, customers are reliant on the quality and resilience of our transparency they require to access services most suited to their technology platform. needs such as best execution and settlement requirements Regulatory expertise Examples: Many of the markets we operate are highly regulated and subject Our Post Trade businesses provide clearing and settlement services to ongoing regulatory change. We have proven expertise in for products traded on non-Group owned venues such as operating transparent, efficient and well governed market BrokerTec, Euronext and Cboe Europe Equities. Similarly, there are infrastructure in regulated markets globally, providing services no requirements for products traded on our venues to be cleared that are trusted, independent and resilient. through our post trade venues. For example, our fixed income platform, MTS, utilises clearing and settlement businesses outside Trusted customer relationships the Group. Our global reach, strong reputation in the industry and relationships with regulators, governments and market FTSE Russell licenses its indices to several other market participants, positions the Group as a trusted partner to customers infrastructure businesses across the globe, such as CME, Cboe and and their interests as financial markets evolve. Our businesses, SGX, allowing these businesses to list products based on our indices. including London Stock Exchange, LCH, FTSE Russell and Borsa Italiana play a leading role in the global financial markets. For Customer partnership example, we have convened industry responses to debates on key ––We have a large network of customers from across the globe global industry trends and developments such as corporate social whose ongoing support, trust and input into our business is responsibility which have resulted in initiatives such as the Green essential to the generation of long term value for all of our Economy Mark. stakeholders, enabling innovation in products which can be rapidly adopted People and culture ––A number of our businesses are owned and governed in People are the foundation of our business with both our customers partnership with our customers and we believe that this leads to and stakeholders benefiting from the expertise, commitment and greater innovation and enhances our ability to add value to their innovation LSEG employees bring. The retention and nurturing of businesses and operations high quality talent is fundamental to delivering our strategy, as is our strong Group culture which is based on our core values of Examples: Partnership, Integrity, Innovation and Excellence. See pages 43 to 46 Group businesses such as LCH, MTS, Turquoise and CurveGlobal for details on how we support employees and build the right culture have customers that are also minority shareholders allowing them to facilitate Group-wide collaboration and drive the Group’s strategy. to participate in the governance and development of the business, its services and products. Group-wide opportunities The interconnected nature of our business and our Group operating In our FTSE Russell business we work alongside our customers and model allows us to explore new ways of creating value outside of other third parties to create bespoke indices enabling them to list our individual businesses. We continue to drive a number of and trade derivatives products based on our indices. initiatives across our Group aimed at enhancing the level of collaboration between our businesses and our overall efficiency as an organisation.

London Stock Exchange Group plc Annual Report 31 December 2019 11 Overview of Group Data and Analytics Risk, Collateral and Processing Solutions Risk, Collateral and Processing Solutions Capital Formation and Trade Execution activities Information Services Post Trade Services LCH Post Trade Services CC&G Capital Markets Group Technology and Monte Titoli Provides a wide range of information and data Provides clearing services through which Provides access to capital for domestic and Our businesses and customers depend on This page shows our business areas products including indices and benchmarks, counterparty risk is mitigated across multiple Offers efficient clearing, settlement and custody international businesses and efficient electronic our secure technology that performs to high analytics, real time pricing data, product asset classes for sell-side clearing members services for cash equity, derivative, commodity platforms for secondary market trading of levels of availability and throughput. and activities across: identification and trade reporting and and buy-side clients in conjunction with and fixed income markets, mostly in Italy. equities, bonds and derivatives. –– Data and Analytics reconciliation services. trading venues globally. –– Risk, Collateral and Processing Group total income: 39% Group total income: 33% Group total income: 7% Group total income: 18% Group total income: 3% Solutions Total Income Contribution Total Income Contribution Total Income Contribution Total Income Contribution Total Income Contribution –– Capital Formation and Trade Execution Sub-segment Sub-segment The tables describe who are our OTC Clearing customers, the revenue drivers and FTSE Russell Non-OTC Real time data Clearing and key performance indicators. Other other revenue Information m m £756 Other £902 2018: £662m Net Treasury 2018: £841m Income

Customer Profile Customer Profile Customer Profile Customer Profile Customer Profile FTSE Russell Clearing services CC&G Primary Markets LSEG Technology ––Asset owners and managers, active and passive ––A wide base of banks, brokers and fund manager ––91 members, 38% of which are international ––Companies from more than 60 countries around ––LSEG divisions, other exchange groups and buy-side firms and trading venues firms worldwide for OTC derivatives and listed the world have come to our markets to raise capital market clients Monte Titoli equities, exchange traded derivatives, fixed income money, together with issuers of bonds, ETFs and ––Banks, trading firms and depositories in Europe, Real time data and commodities ––Wide range of Italian and international banks and other instruments ––Direct to trading firms and via service providers, brokers for both on market and OTC trades. North America, Africa and Asia-Pacific region such as Bloomberg and Refinitiv, that incorporate Issuers of equity and fixed income products Secondary Markets our data with other information (Italian and international) ––Sell-side banks and brokers and buy-side investors worldwide, trading on the Group’s equities, Other information derivatives and fixed income trading platforms ––Our customers vary based on the service provided; they include banks, brokers and fund managers

Main Types of Revenue Main Types of Revenue Main Types of Revenue Main Types of Revenue Main Types of Revenue FTSE Russell Clearing and related services Clearing – CC&G Primary Markets Technology ––Licence fees for benchmarks and subscription fees ––Fees for SwapClear interest rate swap service and ––Fees based on trades or contracts cleared ––Admission fees for initial listing or raising ––Sales of capital markets software, including trading, for data and analytics services other OTC derivative clearing primarily based on and CCP services provided further capital market surveillance and post trade systems ––Asset-linked fees for ETFs, passive funds and membership fees or client trades ––Net Treasury Income on cash and securities held ––Annual fees for securities traded on our markets ––Fees for network connections, server hosting and derivatives tracking indices ––Fees based on trades or contracts cleared and CCP as collateral for margin and default funds systems supplied by Group businesses services provided Secondary Markets Real time data Settlement and Custody – Monte Titoli ––Fees based on value traded (UK equities) or ––Fees based on access charges to our data, on a ––Fees for managing non-cash collateral and ––Revenue mostly from the settlement of equity number of trades or contracts (Italian equities, display or non-display basis and licence fees from compression services and fixed income trades retail bonds and derivatives) third party redistributors Net Treasury Income ––Custody fees are charged on the issuance of an Other information ––Net Treasury Income on cash held as collateral for equity or fixed income instrument, when dividend ––Fees vary based on the nature of service provided, margin and default funds and interest payments are made and on any mostly subscriptions and licence fees corporate action FTSE Russell Clearing services CC&G Primary Markets Highlights Highlights Highlights Highlights Highlights ––The Securities Clearing Corporation of the ––Launch of the Climate WGBI, based on risk ––SwapClear continues to grow with record clearing ––Notional cleared for fixed income products rose ––109 new companies joined our markets in the year Philippines selected Millennium’s Post Trade modelling from Beyond Ratings, a business and compressed volumes 26% to €25bn (2018: €20bn) (2018: 176) product to improve its post trade processes acquired in the year ––ForexClear saw record volumes and launched KPIS KPIs ––Successfully implemented Millennium Exchange ––Dutch pension fund, Pensioenfonds clearing of deliverable FX forwards ––Number of equity trades and derivative contracts ––Number of companies on our markets 2019: 2,400 and Millennium Surveillance platforms for the Detailhandel, selected a custom FTSE Russell ESG ––RepoClear saw record volumes cleared and cleared 2019: 99.5m (2018: 111.9m) (2018: 2,467) Johannesburg Stock Exchange for its Equity, benchmark to align with the UN’s Sustainable Equity Derivatives and FX Derivatives market successfully consolidated a large majority ––Average initial margin held 2019: ––Capital raised by new and further equity issues Development Goals (SDGs) €14.4bn of Euro debt clearing into LCH SA (2018: €11.0bn) 2019: £23.4bn (2018: £28.7bn) KPIs KPIs ––Availability of UK equity market during the year KPIs Monte Titoli Secondary Markets ––ETF assets benchmarked to FTSE Russell ––SwapClear notional cleared 2019: US$1,229tn 2019: 99.99% uptime (2018: 99.99%) Highlights Highlights indices at the end of 2019: US$765bn (2018: US$1,077tn) (at end of 2018: US$606bn) ––Settlement rate of 96% of trades ––UK cash equity value traded decreased by 18% ––SwapClear notional compressed 2019: US$920tn Real time data KPIS ––Borsa Italiana cash equity average daily number (2018: US$773tn) of trades decreased 10% KPIs ––SwapClear Client trades cleared 2019: 1,681,000 ––Settlement instructions handled 2019: 44.4m ––Number of professional terminals taking (2018: 45.4m) ––Turquoise average daily value traded decreased by (2018: 1,487,000) 36%, Turquoise Plato Block Discovery value traded Group data 2019: 167,000 (2018: 174,000) ––Monte Titoli’s assets under custody 2019: €3.32tn ––RepoClear nominal value cleared 2019: €106.0tn increased 11% to €103bn (2018: €93bn) (2018: €98.7tn) (2018: €3.29tn) Other Information KPIs Highlights ––Average cash collateral held 2019: €98.4bn ––Average order book equity value traded per day in ––UnaVista processed 9.3bn reports across 2019 (2018: €86.7bn) London 2019: £4.7bn (2018: £5.8bn) (2018: 8.6bn) ––Average number of equity order book trades per day in Italy 2019: 255,000 (2018: 282,000) ––MTS Repo notional value traded in 2019: €113.5tn Note: Other income £12 million (2018: €87.4tn)

London Stock Exchange Group plc 12 Annual Report 31 December 2019 Strategic Report Overview of Group activities

Data and Analytics Risk, Collateral and Processing Solutions Risk, Collateral and Processing Solutions Capital Formation and Trade Execution Information Services Post Trade Services LCH Post Trade Services CC&G Capital Markets Group Technology and Monte Titoli Provides a wide range of information and data Provides clearing services through which Provides access to capital for domestic and Our businesses and customers depend on products including indices and benchmarks, counterparty risk is mitigated across multiple Offers efficient clearing, settlement and custody international businesses and efficient electronic our secure technology that performs to high analytics, real time pricing data, product asset classes for sell-side clearing members services for cash equity, derivative, commodity platforms for secondary market trading of levels of availability and throughput. identification and trade reporting and and buy-side clients in conjunction with and fixed income markets, mostly in Italy. equities, bonds and derivatives. reconciliation services. trading venues globally.

Group total income: 39% Group total income: 33% Group total income: 7% Group total income: 18% Group total income: 3%

Total Income Contribution Total Income Contribution Total Income Contribution Total Income Contribution Total Income Contribution

Sub-segment Sub-segment

Clearing Primary Technology (CC&G) Secondary – Settlement, equity m Custody m Secondary – m & other ﬁxed income £152 (Monte Titoli) £66 £426 derivatives 2018: £145m Net Treasury 2018: £407m and other 2018: £65m Income

London Stock Exchange Group plc Annual Report 31 December 2019 13 Market trends and our response

1. Continued globalisation

Through its three core businesses: Information Global wealth and redistribution Services, Post Trade, and Capital Markets, the Group While the rate of growth in global wealth appears to be slowing, the supports global economic growth by providing shift between various geographies and demographics is expected to continue beyond 2019, with global wealth now expected to financial markets infrastructure to facilitate safe, reach around US$459 trillion by 20241. As a result, this will drive effective and transparent global capital allocation, increased number of market participants, volumes of financial trading and investment decisions, and associated transactions, and quantity of data, as well as demand for data risk and capital management. from around the world. Growth of Emerging markets Emerging markets have become increasingly important to the The financial markets infrastructure landscape is fast moving world economy having accounted for two-thirds of the real growth and dynamic and has evolved significantly in recent years. in worldwide wealth since 2008. Over the same period, their Our customers and market participants operate globally and range contribution represents double that of North America (the largest from the world’s largest financial institutions to retail investors and financial market in the world). The increasing importance of SMEs. The Group continues to adapt to meet these changing emerging markets continues to be a key trend for the FMI industry2. dynamics in order to maintain its position as a leading Financial Markets Infrastructure (FMI) provider.

The key themes and trends which we have observed are as follows: Implications for LSEG In line with the growth and redistribution of global wealth, customers increasingly require the ability to trade across different 1. Continued globalisation regions, asset classes and currencies and are, therefore, seeking FMI providers who can provide seamless access and solutions on 2. Growth in ESG and a global scale. climate awareness LSEG is a global FMI provider with a growing global footprint, that provides a wide range of services to an increasingly global customer base. 3. Changing investor preferences We continue to invest in serving our global customers and in and operating dynamics developing a broad and balanced global footprint through establishing partnerships in strategically important regions. One of our ongoing priorities is to deepen the Group’s relationship with 4. Innovations in digitisation, key stakeholders across Asia and emerging markets. In pursuing this goal, we launched the Shanghai-London Stock Connect AI and automation initiative in 2019 allowing global investors to access China’s growth through London. We also now include China A Shares and Saudi 5. Ongoing regulatory change Arabia into FTSE’s Global Equity Index Series. Operationally, the Group maintains and continues to expand its centres of excellence around the world including specialised capability centres to support global operational hubs. This includes offices in Colombo, Sri Lanka and Bucharest, Romania.

London Stock Exchange Group plc 14 Annual Report 31 December 2019 Strategic Report Market trends and our response

2. Growth in ESG and climate awareness

ESG and climate factors are becoming a mainstream Credit Suisse Global Wealth reports 2015-2019 consideration in investment decision-making with over US$30 Total wealth by region US$ tn trillion of assets now being professionally managed under responsible investment strategies3. Businesses are also increasingly disclosing climate-related risk metrics in their external reporting with approximately two-thirds of UK corporates reporting on this topic in their 2019 annual reports. 361 Governments are helping to drive this increasing focus on climate 317 change through initiatives such as the G20 Financial Stability Board’s Task Force on Climate-related Financial Disclosures. 280 250 256

Implications for LSEG The increasing awareness of and focus on ESG and climate change for investors brings a growing demand for relevant benchmarks, data and analytics to support investment mandates and decision making. Recognising these shifts in demand, LSEG has continued to invest in building out its data sets, capabilities and products in these areas, such as the acquisition of Beyond Ratings in 2019 (an ESG data and analytics company specialising in the application of ESG principles to fixed income products) and the launch of the Climate Risk-Adjusted World Government Bond Index (Climate WGBI) which is the first of its kind in our industry, ranking sovereign bonds across 22 developed nations. Climate considerations, ESG, and sustainable development goals also continue to be integrated into our equity index capabilities for our client passive mandates, for example in 2019 for Detailhandel and Local Government Pension Scheme Central (LGPS Central). See page 19 of our separate 2015 2016 2017 2018 2019 Corporate Sustainability report for more details. Source: The Global Wealth Report 2019, Credit Suisse (2019)

North America Latin America India Europe China Asia-Paciﬁc Africa

1. The Global Wealth Report 2019, Credit Suisse (2019) 2. Global Wealth 2019, Reigniting Radical Growth, Boston Consulting Group (2019) 3. The ESG Global Survey 2019, Asset Owners and Managers Determine their ESG Integration Strategies, BNP Paribas (2019)

London Stock Exchange Group plc Annual Report 31 December 2019 15 Market trends and our response (continued)

3. Changing investor preferences and operating dynamics

Changing investor preferences Evolving customer operating dynamics Investor preferences are continuing to shift in response to a Buy and sell-side customers continue to focus on operating model changing market landscape characterised by demographic reforms and cost efficiencies in response to continued fee changes, evolving models of state support, global wealth patterns pressures, expanding client demands and regulatory-driven and a continuing low yield environment. This has led to a range changes. Customers are increasingly looking across their of new and innovative investment strategies being adopted by operations to realise efficiencies and are looking for more investors across the globe which are moving beyond traditional innovative and effective ways of accessing the products and equity based strategies towards multi-asset class solutions (as services they require. This trend is supported by the progress being evidenced by the continued growth in trading of fixed income and made by financial technology companies and ‘Big Tech’ providers alternative asset classes) as well as the evolution of investment in digital technology such as automation, cloud computing and AI. processes in incorporating new technologies and making The electronification of trading in fixed income and derivatives is increased use of alternative data4. The growth in passive strategies one such example of the impact of these innovations on trading also continues to shape the investment industry. In 2019 assets in systems and customer operating models. passive US Equity funds outweighed actively managed assets for the first time5. ETFs continue to grow in popularity as a low-cost passive investment vehicle and global ETF assets are expected to reach nearly US$25 trillion by the end of 20256. In parallel, the Implications for LSEG increased accessibility of private capital and historically low Our partnership approach ensures we stay close to our customers interest rates are driving Private Equity, Venture Capital and peer and enables us to play a leading role in understanding and investing to new highs. By the close of 2019, global Private Equity addressing their challenges. In our Post Trade division for example, firms had record amounts of unused funds ready to deploy where operating models are evolving rapidly, UnaVista is delivering totalling US$1.5 trillion7. a new service to assist clients in monitoring the accuracy of their regulatory reporting to help clients mitigate operational and regulatory risks and also reduce reconciliation overheads and SwapAgent is working on the simplification of margin processes Implications for LSEG and the settlement of non-cleared derivatives. In our Capital Across our business divisions, we are focused on expanding our Markets division, MTS provides trading infrastructure for capabilities and service offerings across asset classes. In international markets to facilitate the electronic trading of fixed Information Services, we continue to realise value from the income products. integration of The Yield Book, which has expanded LSEG’s capabilities in fixed income analytics and Beyond Ratings, which has contributed to LSEG’s ESG analytics capabilities. In Post Trade, LCH offers trading across OTC and Non-OTC asset classes including interest rate swaps, FX, CDS, Repo and equities. Within these asset classes, LCH has extended its clearing offering to new sub-asset classes such as non-deliverable options and deliverable forward products within ForexClear. Finally, in our Capital Markets division, we have made further strategic investments and created partnerships to accelerate our response to emerging customer needs. Our minority investment in Nivaura in 2019 for instance, will help investors to streamline private capital processes through its digital platform for issuing and administering corporate bonds, loans and equity.

4. 2019 Investment Management Outlook, A mix of opportunity and challenge, Deloitte (2019) 5. News Article, 2019, End of Era: Passive Equity Funds Surpass Active in Epic Shift, Bloomberg (2019) 6. ETF Strategy, 2018, A look ahead: The ETF industry’s next 25 years, ETF Strategy (2018) 7. Private equity firms are sitting on US$1.5 trillion in unspent cash, and looking to raise more, Fortune (2019) (www.fortune.com/2020/01/25/private-equity-trillion-cash-2020/)

London Stock Exchange Group plc 16 Annual Report 31 December 2019 Strategic Report Market trends and our response

The AI Market 4. Innovations in Size of the global algorithmic trading market digitisation, AI and automation 2024

Advances in technology, including cloud computing, machine US$18.8bn8 learning and AI, have enhanced data analytics and storage capabilities across the FMI industry. Further, technological forecast developments have increasingly digitised trading, generating vast quantities of new data. For example, the US capital markets 8 2019 US$11.1bn watchdog FINRA reported a daily average of 66.7 billion electronic records being created in 2018, representing an 87% increase from the previous year11. This brings an increased need for data categorisation and management. Data is increasingly viewed as a core component in investment decision-making, with customers demanding data-driven solutions in order to realise value. As a result, customers require enhanced data management, more sophisticated analytics, and data solutions and effective data distribution to keep up with the fast-paced nature of today’s markets.

Estimated % of market trading activity conducted by AI Implications for LSEG LSEG’s data and analytics capabilities have grown significantly over the last 10 years. Developing these capabilities has been a key strategic priority for our Group and remains a core part of our strategy and plans for the future. We have grown our capabilities in this space through a combination of organic initiatives, 50-70% 60% partnerships and acquisitions over the last 10 years. Going forward, Equities9 Futures9 our proposed acquisition of Refinitiv will transform our data and analytics capabilities and will create new opportunities for us to deliver enhanced value for our customers. Supporting our development in this space, we are also engaging with 57 technology companies in our Cloud migration programme, a key focus of technology investment in 2019 and beyond.

50% 90% Treasuries9 Forex10

8. The Algorithmic Trading Market, Research And Markets, May 2019 9. Artificial Intelligence in Finance, The Alan Turing Institute, April 2019 10. How much artificial intelligence has changed the Forex trade, AIthority July 2019 11. News Release, 2019, US regulator reports record surge in trade data, Financial Times (2019)

London Stock Exchange Group plc Annual Report 31 December 2019 17 Market trends and our response (continued)

5. Ongoing regulatory change

Regulatory change Implications for LSEG Brexit update The absence of equivalence decision by the end of the transitional period may The withdrawal agreement provides for a transition period until 31 December impact LSEG’s Post Trade divisions revenue due to EU clients not being able to 2020 during which the UK will continue to apply European Union law but it will access LCH Limited and UK clients not being able to access LCH S.A and CC&G. no longer be represented in the EU institutions. As such, the negotiations on the It may also impact the trading revenue generated by LSEG’s Capital Markets future partnership between the EU and the UK is intended to take place during business due to the implications of the Share Trading Obligation. As part of a the transition period. Both the UK and the EU will endeavour to conclude structured Brexit programme formed by LSEG, it continues to engage with UK assessments of future regulatory equivalence by the end of June 2020 as set and EU Brexit policy leaders to advise on financial market infrastructure out in the revised political declaration. These equivalence decisions will impact considerations. Our key objectives are: (i) maintaining London’s position as a LSEG activities, including equivalence for the EU CCPs operation in the UK and global financial hub; (ii) providing continuity of cross-border financial services; UK CCPs operating in the EU, as well as the equivalence for the purpose of the and (iii) protecting against policies which may result in fragmentation of so-called ‘Share Trading Obligation’ which requires investment firms to ensure financial markets. We continue to maintain an ongoing dialogue with UK, that the trades they undertake in shares admitted to trading on a regulated EU and other international authorities with respect both to the need for market, or traded on a trading venue, take place on a regulated market, contingency measures and to our contingency plans for LSEG businesses. Multilateral Trading Facility, systematic internaliser, or an equivalent third- country trading venue. Cross-border market access As a leading global financial market infrastructure business, market access As G20 mandates continue to be implemented and revised, focus has increased rules impact how customers across jurisdictions access LSEG’s products and across jurisdictions on cross-border market access to financial market services. We promote harmonisation and cross-border rules that support open infrastructure products and services. In the EU, EMIR 2.2, the EU Benchmark and global markets. We remain closely engaged with authorities at national and Regulation (the “Benchmark Regulation”), MiFID II/MiFIR and other financial multilateral levels to promote open, cross-border access to its global offerings. services files contain third country provisions that could impact EU participant access across non-EU clearing, trading, benchmarks and other global products and services. The Benchmark Regulation third country transitional period now ends on 31 December 2021. In the US, the CFTC has proposed several revisions to expand cross-border derivatives markets access. The UK will continue to evaluate its market access rules pending Brexit developments. Benchmark Regulation and LIBOR transitions FTSE Russell is a leading global benchmarks provider. FTSE International The Benchmark Regulation came into effect in January 2018. Building on the Limited has been authorised by the FCA as a Benchmark Administrator, under International Organisation of Securities Commissions (IOSCO) Principles, the the Benchmark Regulation. We view the Benchmark Regulation positively, as it regulation impacts benchmark users, contributors and administrators. There raises standards across the industry. Regarding the inter-bank reference rate are initiatives in other jurisdictions to review the regulatory framework transitions, LCH is closely engaged with the relevant government authorities governing benchmarks. Regulators have established a clear priority to move and industry participants to fully support a smooth transition to selected away from inter-bank rates including LIBOR and EURIBOR to introduce alternative reference rates. alternative reference rates in several major jurisdictions.

London Stock Exchange Group plc 18 Annual Report 31 December 2019 Strategic Report Market trends and our response

Regulatory change Implications for LSEG Uncleared margin rules (UMR) The new phase of the UMR to be introduced may drive market participants to Under the UMR, certain non-centrally cleared OTC derivatives will be subject to clear more trades centrally and, therefore, may increase the overall number of initial and variation margin requirements. The UMR are currently being phased derivatives which are centrally cleared across the sector. in. The Basel Committee on Banking Supervision and the IOSCO have agreed to extend by a year the final implementation of the margin requirements to September 2021 for some smaller counterparties, although as at the date of this document, the deadline within the EU is September 2020. Cleared instruments such as exchange traded derivatives and centrally-cleared OTC swaps are not within the scope of UMR. CCP recovery and resolution Harmonisation of the requirements for CCP recovery plans, and the introduction Authorities across Europe, North America and other major jurisdictions, as well of resolution plans prepared by the resolution authorities should provide clarity as international standard setters, are working on further developing the on the impact on CCPs and identify the critical functions they must maintain in regulatory frameworks for the recovery and resolution of CCPs. In an extreme the unlikely event of their failure. We will continue to assist the authorities and scenario where CCPs face severe distress or failure, this global framework will provide input for the development of this framework including in respect of the ensure that the critical functions of CCPs are preserved while maintaining potential increase of CCP resources. financial stability. The EU framework is expected to be finalised in 2020. Discussions are now ongoing around a potential increase of CCP resources. Market Structure Reviews The impact on LSEG includes rules on market transparency, trading protocols MiFID II/MiFIR is the widest ranging of the EU’s legislative initiatives in terms of and microstructures, provision of market data, transaction reporting, SME its impact on LSEG and its customers. In the US, there is growing focus on both Growth Markets, and Open Access for CCPs and benchmark providers. The equity and fixed income market structure topics with a view to implementing impact of MiFID II/MiFIR has been broadly neutral, with the ability to offer changes, whilst there is a global regulatory scrutiny process led by IOSCO into customer solutions in areas such as Turquoise block trading and Open Access the rapidly growing ETF space. The European Commission and ESMA have potentially providing opportunities across all of our segments (see the paragraph started the MiFID II Review process by series of consultations – first one was headed Open Access, on the next page). We continue to follow the US debates conducted in Q4 2019, on Market Data pricing and introduction of a closely given the potential impact on LSEG’s growing US operations, as well as Consolidated Tape. It is likely that the European Commission will propose the global focus on ETFs. LSEG keeps monitoring and engaging on the Market legislative amendments in this area in 2020. In parallel, the European Data pricing and introduction of Consolidated Tape debates, supporting among Commission is running an independent feasibility study on Consolidated Tape. others the Reasonable Commercial Basis principle. Capital Markets Union (CMU) CMU may increase activity across LSEG’s capital markets and post trade CMU is a plan introduced by the European Commission that aims to create businesses. We are closely following development of the relevant regulatory deeper and more integrated European capital markets, enhance competition files such as the Prospectus Regulation and the Investment Firm Review. and remove barriers to retail investment.

London Stock Exchange Group plc Annual Report 31 December 2019 19 Market trends and our response (continued)

Regulatory change Implications for LSEG Sustainable finance We continue to actively contribute to this global and regional debate, in particular The Global Commission on the Economy and Climate stated, in 2018, that the European Commission Sustainable Finance Action Plan and the Technical the next two-three years are a critical window when many of the policy and Expert Group, and the UK Green Finance Taskforce and Institute. In Italy, Borsa investment decisions that shape the next 10-15 years in relation to climate Italiana joined the Italian Observatory on Sustainable Finance. As our customers finance will need to be implemented. Given the desire of some investors to integrate climate change and sustainability into their plans, we are supporting integrate ESG factors into investment strategies, asset managers and issuers to access capital and investors’ choice in developing and implementing intermediaries throughout the value chain across the world are responding. investment strategies. Open Access Open Access remains a key principle that underpins our strategy and business Open Access underpins provisions within MiFID II/MiFIR that change the way model and is fully aligned with the way we currently operate. Our clearing some clearing houses, trading venues and index providers will need to provide services already accept clearing trades that originate from venues outside of their products and services. The changes, which will fully apply from July 2020, our Group; some of our trading venues already provide choice of clearing require access to be provided to potential users of trading, clearing and indices through alternative CCPs outside of our Group; and FTSE Russell provides index on a non-discriminatory basis. licences to several exchange businesses that are competitors to our trading venues. Open Access increases competition across a range of services, to the benefit of investors and market participants, and potentially provides our relevant businesses and partnerships with opportunities to launch new products and attract new trading and clearing flows. Emerging technology Emerging technology related regulatory initiatives have implications in various For the financial services industry, regulators in major jurisdictions are closely degrees to all of our functions and services, either as compliance obligations or monitoring and developing regulatory frameworks on emerging financial constituents of the services that we provide to our customers. We continue to technology (“Fintech”), specifically the potential uses of distributed ledger monitor and engage with regulators and leading industry working groups on technology, cloud computing, machine learning and AI. Regulators are also these issues for the development of regulatory frameworks. exploring opportunities for regulatory technology to help develop new strategies for the hosting and use of regulatory data. There is continuous focus from regulators on the operational resilience of FMIs to ensure continuity of critical business services and the overall resilience of the financial sector. Operational resilience and cyber security One of our top priorities is to continue to invest in ensuring cyber resilience and Regulators (both at EU, national level and through the G7 cyber experts working compliance with regulations. In addition to complying with current cyber and group and other multilateral bodies) and the industry are working to keep pace data protection requirements, we comply with significant data and cyber with the growing cyber threats facing markets through enhancements and operational controls and standards required under regulations. We continue to further development of resilience standards. monitor and engage with regulators and leading industry working groups on the development of regulatory frameworks and appropriate harmonisation of standards across jurisdictions.

London Stock Exchange Group plc 20 Annual Report 31 December 2019 Strategic Report Strategy in action Strategy in action

Strategy

We recognise the vital role which our Group plays in the global economy and therefore our responsibility in promoting sustainable economic growth and financial stability for our stakeholders. We monitor the evolving landscape in which we operate and the positioning of our businesses to ensure that we can best fulfil our purpose and achieve our ambition of being the leading global financial markets infrastructure business. Underpinning our strategy is a commitment to our core principles of Open Access and customer partnership.

Our Purpose Our Vision

We support global financial stability and sustainable To become the leading global financial economic growth by enabling businesses and economies markets infrastructure group to fund innovation, manage risk and create jobs

Our Business Divisions Information Capital Markets Post Trade Services

Our Strategy Data and analytics Capital formation Risk, collateral and and trade execution processing solutions

Group operating model and culture supported by operational and technological excellence

Our Core Principles Open access Customer partnership

Refinitiv The proposed acquisition of Refinitiv will accelerate our strategy and transform LSEG’s position as a global financial markets infrastructure leader of the future. In particular, Refinitiv will enhance our customer proposition in data and analytics, will create a global multi-asset class capital markets business and will strengthen our global footprint. As LSEG and Refinitiv share the core principles of open access and customer partnership, these will continue to differentiate our offering and ability to deliver world-leading financial infrastructure services.

London Stock Exchange Group plc Annual Report 31 December 2019 21 Strategy in action (continued)

Strategic pillars Data and analytics Capital formation Risk, collateral and Group operating and trade execution processing solutions model and culture

The increasing importance of data in the investment Building on our existing capital markets capabilities, Providing stable, transparent and efficient post trade Creating a strong and diverse culture built around our and trading process is shaping what customers we aim to further grow our global footprint and solutions globally where risk is appropriately values and nurturing a Group mindset is a key require from financial markets infrastructure ability to offer cross-border trading and investment managed is a key priority for our business. We enabler in building a Group operating model focused businesses. Our Information Services division is opportunities, in addition to developing our multi- continue to invest in the stability and resilience of on delivering our business strategy. Additionally, we driving the development of our data and analytical asset class capabilities and increasing our our clearing and settlement businesses and in are committed to developing new ways of facilitating capabilities. At a Group-wide level, we also aim to participation in the private markets capital raising growing our regulatory reporting and post trade Group-wide collaboration across our business develop and refine the datasets we source and the process. This is supported by a strong focus on capabilities to increase transparency for our divisions. The drive towards creating an effective capabilities that we have in all of our businesses to developing our technology capabilities to enable us customers and help them meet their regulatory Group operating model is underpinned by our efforts support our objective to become a global leader in to build and run high performing and resilient reporting requirements. in developing a stable, resilient and efficient data and analytics. platforms. technology infrastructure for our customers and businesses.

Examples Examples Examples Examples ––We continue to invest and grow our product offering with over ––This year we launched the Shanghai-London Stock Connect ––In October we announced the creation of a Post Trade ––We have continued to refine our organisational structure 340 new equity indices launched in 2019 and developed new initiative which provides investors with access to investment division, in effect from 1 January 2020, which brings together across the Group. Our Group COO is focused on building the Fixed Income indices including the Climate Risk-Adjusted opportunities in China through the London markets our leading clearing and settlement businesses: LCH Group, operating model required to support our next phases of World Government Bond Index CC&G and Monte Titoli and our regulatory reporting business, growth and proposed integration of Refinitiv. Key progress ––In February, we announced an investment in Nivaura, a UnaVista. The LSEG Post Trade division will allow us to deliver made in 2019 included, the appointment of a new Chief ––We have continued to drive organic initiatives across our Group digital platform for issuing and administering corporate greater customer value by pooling expertise, resources and Information Officer who will be a member of LSEG’s Executive to further explore how we can utilise our proprietary datasets bonds, loans and equity, which will help us in developing servicing capabilities in Post Trade Committee, the creation of a single Post Trade division and capabilities, alongside targeted inorganic initiatives such innovative solutions to assist companies in the capital raising bringing together our post trade assets across the UK and as the acquisition of Beyond Ratings in June and the proposed process. We also increased our investment in CurveGlobal, ––We further grew our ForexClear offering by linking Europe and the creation of a Group wide compliance function acquisition of Refinitiv the interest rate derivatives venture formed between LSEG ForexClear with FX Connect TradeNeXus, enabling simpler and a consortium of dealer banks buy-side access to clearing ––We have continued to upgrade our underlying technology infrastructure to address the evolving needs of the business ––In October we launched the Global Equity Segment which whilst simultaneously integrating a strong cyber security allows investors to trade some US blue chip and US-listed competency within our operational processes Asian ADRs during London hours. This helps to advance the London Stock Exchange’s ability to operate as a truly ––We have made improvements in employee mobility and international exchange diversity within the Group, enabled by the introduction of a Group-wide career framework and the creation of inclusion networks

London Stock Exchange Group plc 22 Annual Report 31 December 2019 Strategic Report Strategy in action

Strategic pillars Data and analytics Capital formation Risk, collateral and Group operating and trade execution processing solutions model and culture

London Stock Exchange Group plc Annual Report 31 December 2019 23 Executive management team

The Executive Committee manages the business on a day-to-day basis. The team meets regularly to review a wide range of business matters, including financial performance, development of strategy, setting and monitoring performance targets, reviewing projects, corporate culture and other initiatives. Profiles of the Executive team are provided as at January 2020 (for further information on David Schwimmer, David Warren and Raffaele Jerusalmi, who are also members of the Board of Directors, see David Schwimmer their biographies on page 75). Group Chief Executive Officer. Joined the Group in August 2018.

Changes to the Executive Management team Chris Corrado was Group Chief Operating Officer and Chief Information Officer during 2019. He will leave LSEG at the end of the first quarter 2020 and is succeeded by Anthony McCarthy as Group Chief Information Officer, effective 1 January 2020 and by David Shalders as Group Chief Operating Officer effective 1 January 2020.

Murray Roos will join as Group Director, Capital Markets on 1 April 2020. Raffaele Jerusalmi will continue as Group Director of Capital Markets until Murray joins the Group.

Tim Jones, Group Head of Human Resources, and Gavin Sullivan, Group Communications Director, both joined the Executive Committee with effect from 1 January 2020, reflecting the importance of these roles as the Group continues to develop.

David Warren Group Chief Financial Officer. Joined the Group in July 2012.

David Shalders Raffaele Jerusalmi Group Chief Operating Officer and Chief Integration Officer. Chief Executive Officer of Borsa Italiana S.p.A. Joined the Group in 2019. Joined the Group in October 2007.

David joined LSEG as Chief Integration Officer and subsequently also assumed the role of COO. He brings more than thirty years’ experience in Integration, Technology and Operations in the financial services sector. Most recently, he was Group Operations and Technology Director at Willis Towers Watson.

London Stock Exchange Group plc 24 Annual Report 31 December 2019 Strategic Report Executive management team

Diane Côté Catherine Johnson Tim Jones Group Chief Risk Officer. Group General Counsel and Head of Compliance. Group Head of Human Resources. Joined the Group in 2012. Joined the Group in 1996. Joined the Group in 2010.

Diane was previously Aviva Plc’s Chief Finance Catherine Johnson joined LSEG in 1996 and was Tim was appointed Group Head of Human Resources Operations Officer. Prior to this, she held the appointed to the LSEG Executive Committee in 2016. in May 2011 and is responsible for attracting, position of Aviva’s Chief Audit Officer. Diane has She advises the Board and senior executives on key developing and retaining talent for the Group’s global many years’ experience holding senior positions legal matters and strategic initiatives, as well as being business. Tim was previously HR Director at Aegis within Aviva and other leading organisations, responsible for LSEG’s Compliance function. Catherine Media, most recently for the EMEA region, and spent including Standard Life Assurance. qualified as a lawyer at Herbert Smith in 1993. 15 years at Marks & Spencer in a variety of roles.

Daniel Maguire Anthony McCarthy Nikhil Rathi Group Director of Post Trade. Group Chief Information Officer. Chief Executive Officer of London Stock Joined LCH in 2008. Joined the Group in 2017. Exchange plc and Director of International Development. Daniel has wide experience in risk management, Anthony (Tony) was appointed Group CIO in January Joined the Group in 2014. regulatory strategy, product management and 2020. He was CIO for LCH Group and Ltd from October development, programme delivery and sales and 2017 until December 2019 where he was accountable Nikhil joined from the UK Treasury, where he held operations management. He was previously Global for the provision of IT services in each CCP. Previously a number of senior positions, including Director of Head of SwapClear and also ForexClear and Listed Tony was a Managing Director in IT at Deutsche Bank the Financial Services Group, representing the UK Rates at LCH, and most recently LCH Group CEO. and was the Group CIO for the bank from March 2011 Government’s financial services interests to November 2013. internationally, and Private Secretary to the UK Prime Minister for three years from 2005 to 2008.

Murray Roos Waqas Samad Gavin Sullivan Group Director of Capital Markets. Group Director of Information Services and Group Communications Director. To join the Group in April 2020. Chief Executive Officer of FTSE Russell. Joined the Group in 2013. Joined the Group in 2016. Murray will join the Group in April 2020. Murray was Previously held senior roles at Credit Suisse from previously at Citigroup as Global Co-Head of Equities Waqas has spent more than 20 years in financial 1998–2012, latterly as Acting Global Co-Head of and Securities Services, having previously led Global services. Previously he was CEO of Barclays Branding & Communications, responsible for Equity Sales and Trading, as well as the Multi-Asset Risk Analytics & Index Solutions, and before that the global Investment Banking and Asset Structuring Group. Prior to joining Citigroup in 2015, at Deutsche Bank and at Credit Suisse in a variety Management divisions. Prior to Credit Suisse, she he spent a decade at Deutsche Bank in various senior of index research, quantitative and technology worked in Russia as an advisor on USAID-funded capital markets roles. roles. He is the current Chairman of Index privatisation programmes. Industry Association.

London Stock Exchange Group plc Annual Report 31 December 2019 25 Segmental review

Total Income 13 14 15 12

8 1 7 1

6 3 5 4

12 months to 12 months to 31 December 31 December 2019 2018 £m £m Information Services 1 FTSE Russell 649 592 2 Real time data 97 94 3 Other information 156 155 902 841 Post Trade Services LCH 4 OTC 307 268 5 Non-OTC 140 136 6 Other 103 83 7 Net Treasury Income 206 175 756 662 Post Trade Services CC&G and Monte Titoli 8 Clearing (CC&G) 43 41 9 Settlement, Custody & other (Monte Titoli) 60 61 10 Net Treasury Income 49 43 152 145 Capital Markets 11 Primary Markets 151 113 12 Secondary Markets – Equities 151 169 13 Secondary Markets – Fixed income, derivatives and other 124 125 Further information 426 407 Sustainable initiatives can be identified by the following symbols Technology Services with more detail available in the supporting sustainable growth 14 Technology 66 65 section of this report and in our Corporate Sustainability report: Other 15 Other 15 M Our Markets 12 S Our Services Total Continuing Income 2,314 2,135

London Stock Exchange Group plc 26 Annual Report 31 December 2019 Strategic Report Information Services

Information Services

Sub-segment Introduction Information Services is a leading global multi-asset class provider of indices, analytics and data solutions. The division also provides customers with a range of real time and reference data, news, £902m software, regulatory reporting and reconciliation services. These 2018: £841m are offered through FTSE Russell and other businesses that include Mergent, SEDOL, UnaVista and RNS. 1 Revenue drivers FTSE Russell revenues originate from: Subscription based fees, which include recurring fees for index benchmark licences, data subscriptions and analytics services, and Asset Based fees, which 3 are linked to assets under management (AUM) for ETFs and passive funds benchmarked to FTSE Russell indices, and from index derivatives contracts.

Real Time Data revenues are driven by access charges to our real 2 time price and trading data, on either a display or non-display basis, as well as fees charged to vendors who re-distribute this data.

Other Information Services revenue comes from fees for the services offered by businesses including Mergent, SEDOL, UnaVista and RNS. These are a mixture of subscription and licence fees.

Further information As of 1 January 2020, UnaVista, our trade reporting and 1 72% reconciliation business that previously reported as part of the FTSE Russell Information Services division, reports as part of our Post Trade division. For more information on Information Services, see: 2 11% www.lseg.com and www.ftserussell.com Real time data 3 17% Market trends and our response for Information Services can be Other found on pages 14–20. Profitability of each segment can be found in the Financial Review on pages 53–59. A glossary of terms can be 4 XX% found on pages 204–206.

Highlights FTSE Russell FTSE Russell Other Information Sustainability Subscription Asset based 340+ US$765 345 €5.8 billion thousand billion Over 340 new equity indices ETF AUM benchmarked RNS announcements issued FTSE Russell ESG launched in the year to FTSE Russell indices (2018: 342 thousand) benchmark selectved for at year end new passive equity fund (2018: US$606bn) designed to align with aspects of the UN SDGs

London Stock Exchange Group plc Annual Report 31 December 2019 27 Segmental review (continued)

Information Services Index – Subscription US$15 ––Index – Subscription revenues up 12% to £418 million ––Information Services revenue up 7% to £902 million on a reported (2018: £373 million), and up 8% on a constant currency basis trillion basis, and up 5% on a constant currency basis AUM benchmarked to FTSE Russell calculates widely used indices across both equity and FTSE Russell indices FTSE Russell fixed income asset classes, including the FTSE 100, FTSE All-share, ––FTSE Russell revenues up 10% to £649 million Russell 2000 and World Government Bond Index (WGBI), alongside (2018: £592 million), and up 6% on a constant currency basis multi-asset indices and custom indices created in response to client demand. In addition, indices increasingly focus on ––2017–2019 target for FTSE Russell double-digit revenue growth alternative investment strategies such as incorporating ESG each year, achieved in 2019 with 10% considerations, smart beta, and factor-based metrics. FTSE Russell is a leading global provider of benchmarks, analytics, 2019 saw the launch of the Climate WGBI, which utilises climate and data solutions with approximately US$15 trillion assets under risk modelling developed by Beyond Ratings. This index allows management (AUM) benchmarked to its indices. sovereign debt investors to incorporate climate change risk considerations into their portfolios. S FTSE Russell also provides a range of data and analytics solutions to assist customers in their risk management, investment strategy Dutch pension fund, Pensioenfonds Detailhandel, selected a analysis and in asset allocation, as well as the analytics tools custom FTSE Russell ESG benchmark designed to align with provided through The Yield Book. aspects of the UN’s Sustainable Development Goals (SDGs), as the basis of a new passive equity fund managed by BlackRock. S Sustainability is an increasingly important component of investment decisions for domestic and international investors, with Other index achievements during the year include the launch of a growing demand among asset owners and asset managers to FTSE UK 100 ESG Select index which was selected by HSBC as the integrate climate risk and ESG considerations into their equity and underlying benchmark for a series of new ESG-related structured fixed income investment strategies. With nearly two decades of products, a new Chinese Green Bond index series, the first sustainable investment experience, FTSE Russell provides clients factor-based indices linked to the WGBI in partnership with with sustainable investment data models, ratings, analytics, and Nomura, and a Multi-Asset Composite index series. S indices covering thousands of companies across developed and emerging markets globally. In March, FTSE Russell announced its intention to launch an indicative FTSE Digital Assets index, to evaluate and test a In June, LSEG completed the acquisition of Beyond Ratings, a benchmark for the most actively traded digital assets. This will also highly regarded provider of ESG data for fixed income investors, help assist in the establishment of new industry standards for the enabling the Group to further support clients and grow capabilities digital assets market in consultation with market participants. around sustainable finance and investment. Demonstrating FTSE Russell’s continued engagement with China and in response to the reclassification of China A Shares to secondary emerging market status, China A Shares were included for the first time into FTSE Russell’s flagship FTSE Global Equity Index Series (GEIS). The first phase of inclusion is expected to be completed in March 2020, alongside the transition of Saudi Arabia to secondary emerging market status.

London Stock Exchange Group plc 28 Annual Report 31 December 2019 Strategic Report Segmental review

A country classification framework for FTSE Russell global Real Time Data fixed income benchmarks was launched in early 2019 to ––Real time data revenues up 3% to £97 million (2018: £94 million), 231 enhance the transparency of the process used to govern also up 3% on a constant currency basis benchmark inclusion. Across the year, Israel met the necessary Real time data revenue rose due to growth in redistribution licences million criteria for inclusion in the WGBI and its addition has been while being partially offset by lower professional terminal usage Derivative contracts announced for April 2020. China has been added to the Watch across the Group which declined to 167,000 (2018: 174,000), with the based on FTSE Russell List for a potential upgrade towards the level required for UK at 65,000 (2018: 69,000) and Italy at 102,000 (2018: 105,000). indices traded inclusion. Several other fixed income markets are being Enterprise arrangements also offer longer-term revenue stability for (2018: 234 million) considered for the introduction of standalone indices, such LSEG. In accordance with MiFID II, real time data continued to be as Saudi Arabia, Nigeria, Vietnam, Argentina and Croatia. offered as disaggregated data packages giving customers more choice and flexibility. Real time data has also continued to focus on Index – Asset Based expanding its user base in Asia and has seen strong growth in the ––Index – Asset Based revenues up 6% to £231 million 9.3 number of retail customers accessing the service in 2019. (2018: £219 million), and up 2% on a constant currency basis billion Other Information Services FTSE Russell indices are used by ETF issuers for a range of Reports processed by ––Other revenues up 1% to £156 million (2018: £155 million) and investable products. At the end of 2019, US$765 billion AUM was UnaVista in the year down 1% on an organic and constant currency basis benchmarked across 63 issuers of ETFs licensed by FTSE Russell. (2018: 8.6 billion) UnaVista FTSE4Good TIP Taiwan ESG Index was licensed by Yuanta SITC for UnaVista helps firms to reduce operational and regulatory risk the first ESG-focused ETF to be on the Taiwan Stock Exchange. through regulatory reporting, reference data and analytics Other ETF achievements in the year included FTSE Russell indices solutions. UnaVista processed 9.3 billion reports across year (2018: being chosen by Franklin Templeton for an additional eight equity 8.6 billion) and supported a range of clients to prepare for the next ETFs, VanEck Australia selected FTSE Russell for a global real estate set of reporting obligations that are due to come into effect in 2020 ETF, BetaShares launched Australia’s first FTSE 100 ETF and a FTSE under Securities Financing Transactions Regulation (SFTR). From Russell green real estate index was licensed by BNP Paribas Asset 1 January 2020, UnaVista reports under the new Post Trade division. Management for a new ETF listing. Reference data FTSE Russell indices are licensed globally for derivatives trading The Group’s range of reference data offerings include SEDOL, across Europe, North America and Asia, demonstrating the Group’s Mergent and LEI. The SEDOL Masterfile Service database provides open access approach. During the year, 231 million derivative clients with access to reference data on over 100 million securities, contracts based on FTSE Russell indices were traded, down 1% on Mergent provides extensive data on private and public companies, the previous year, with lower volumes in the US and Italy, partially while LEI allocates unique codes to identify legal entities with offset by strength in Asia led by the SGX traded FTSE China A50 178,000 assigned across six continents. Index Futures. Regulatory News Service Regulatory News Service (RNS) is the leading provider of regulatory disclosure services to UK listed and AIM companies. In 2019, more than 345,000 regulatory announcements were published by RNS (2018: 342,000), covering the majority of UK regulatory announcements. RNS is approved by the FCA to operate as a Primary Information Provider in the UK.

ETF assets under LSE and Borsa management benchmarked Italiana terminals to FTSE Russell indices thousands (year end) US$ bn (year end) 207 765 200 132 128 180 174 167 624 606 111 105 102 452 381

75 72 69 69 65

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

LSE terminals Borsa Italiana terminals

London Stock Exchange Group plc Annual Report 31 December 2019 29 Segmental review (continued)

Post Trade Services LCH

Sub-segment Introduction LCH is a leading global clearing house, with clearing operations in the UK, Eurozone, US and an expanding presence in the Asia-Pacific region. LCH provides services to mitigate counterparty risk across £756m multiple asset classes for clearing members and their clients, 2018: £662m operating through an open access model that clears for the Group’s markets and other major exchanges and platforms as well as a range 1 of OTC markets. As well as clearing LCH also offers a growing service in the non-cleared market for OTC interest rate swaps.

Revenue drivers In OTC derivatives markets, members are charged an annual fee for ‘all you can eat’ clearing or a lower annual fee with variable fees based on cleared volume, while clients pay a fee per trade or based on notional cleared. In non-OTC markets, all users pay a fee based on volumes or value cleared. Additional fees are levied for value 4 added services such as compression, which are recognised as Other LCH revenue alongside fees for non-cash collateral. Net Treasury Income is the result of interest earned on cash collateral lodged with the clearing house, for margin and default funds.

Further information 3 2 As of 1 January 2020, the Group’s Post Trade businesses, that were previously reported separately as LCH and Post Trade Italy, were aligned, in a manner consistent with the necessary regulatory 1 41% oversight, into one Post Trade division. Post Trade now includes LCH OTC Group, our Italian post trade businesses CC&G and Monte Titoli, and UnaVista, our trade reporting and reconciliation business that 2 18% previously reported as part of Information Services. Non-OTC 3 14% For more information on LCH, see: www.lseg.com and www.lch.com Other 4 27% Market trends and our response for Post Trade Services, LCH can be Net Treasury Income found on pages 14–20. Profitability of each segment can be found in the Financial Review on pages 53–59. A glossary of terms can be found on pages 204–206.

Highlights LCH OTC Non-OTC Other 2017-19 margin target 54.9% US$1.2 €106 US$920 quadrillion trillion trillion

Target for c.50% adjusted Notional cleared Nominal value cleared Notional compressed EBITDA margin by 2019 by SwapClear at RepoClear at SwapClear achieved, with 54.9% (2018: US$1.1 quadrillion) (2018: €98.7 trillion) (2018: US$773 trillion) margin for the year

London Stock Exchange Group plc 30 Annual Report 31 December 2019 Strategic Report Segmental review

Post Trade Services LCH US$4.2 trillion). Changing global interest rates and associated volatility in the swaps markets as well as continued expansion of US$35.1 ––LCH income for 2019 was £756 million (2018: £662 million), the product suite, for example the launch of further non- up 14% on a reported basis and on a constant currency basis deliverable interest rate swaps in new currencies, have contributed billion to these strong volumes in 2019. Going forward we expect these ––LCH 2017-2019 target for c.50% adjusted EBITDA margin by Capital saved for our factors to be the main growth drivers for SwapClear as regulatory 2019 achieved, with 54.9% margin members and customers tailwinds are largely behind us. through the use of The UK’s withdrawal agreement from the EU provides a transition compression services LCH continues to innovate and work in partnership with its period until 31 December 2020. Both the UK and EU hope to customers to meet strong market demand for the clearing of conclude assessments of future regulatory equivalence by June alternative reference rate products. In 2019 LCH became the first 2020. These decisions will impact equivalence for EU central clearing house to offer clearing of Euro-denominated swaps counterparties (CCPs) operating in the UK and UK CCPs operating benchmarked to the new reference rate, €STR. We have seen good in the EU. The absence of an equivalence decision by the end of the levels of traction in our alternative reference rate products with over transitional period may impact LSEG’s Post Trade division due to US$2 trillion of notional cleared across swaps benchmarked to EU clients being unable to access LCH Ltd and UK clients being SARON, SOFR and €STR in 2019, as well as over £32 trillion of unable to access LCH SA and CC&G. notional cleared in swaps benchmarked to SONIA (2018: £34 trillion). OTC Clearing SwapClear is further able to present opportunities for capital and ––OTC derivatives clearing revenue was up 15% to £307 million, an other efficiencies by offering both its own and third-party increase of 13% on a constant currency basis (2018: £268 million) compression services which reduce the number of trades and ––2017-2019 target for LCH OTC double-digit revenue growth each overall notional value of portfolios by netting down compatible year, achieved in 2019 with 15% positions. SwapClear further expanded its own compression capabilities in 2019 and notional compressed continued to increase, SwapClear rising 19% to US$920 trillion in 2019 (2018: US$773 trillion). SwapClear is the largest OTC Interest Rate Swap clearing house in the world, offering access to a deep pool of liquidity across 26 SwapAgent currencies to its 123 sell-side members and growing buy-side SwapAgent, LCH’s service which aims to provide processing, client base. In 2019, The Bank of China Ltd joined SwapClear, margining and settlement capabilities to the non-cleared space, representing LCH’s first clearing member from a Chinese banking has seen continued growth in volumes for its cross-currency swaps group and demonstrating LCH’s global reach as well as our growing offering, with US$726 billion processed during 2019. SwapAgent business in, and commitment to, the Asia-Pacific region. now has 16 members using the service.

2019 was a record year for SwapClear, total notional cleared ForexClear reached US$1.2 quadrillion (2018: US$1.1 quadrillion). Client ForexClear offers clearing across 17 currency pairs for non- clearing also saw record levels, with notional cleared increasing deliverable forwards and, in collaboration with CLS settlement 16% to US$301 trillion (2018: US$259 trillion) and client trades service, offers clearing of spot, forwards and FX options in eight increasing by 13% to 1,681,000 (2018: 1,487,000). currency pairs. In October 2019, ForexClear became the first CCP to launch clearing for outright FX forwards, which expanded the range Inflation swap clearing saw volumes cleared increased by 43% of FX derivatives now available for clearing and incorporates the first with a total of US$6.0 trillion in notional cleared in 2019 (2018: physical settlement service for cleared FX products.

SwapClear – SwapClear – SwapClear – Client: no. ForexClear – Total notional cleared Compression volumes of cleared trades Notional cleared US$ tn US$ tn thousands US$ tn 1,229 1,229 302 1,681 17.2 18.0 1,077 1,487 874 920 1,227 11.2 666 952 533 678 309 316 3.2 1.0

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 trades cleared Notional Notional Maturing compressed 31 Dec 2018 31 Dec31 2019

London Stock Exchange Group plc Annual Report 31 December 2019 31 Segmental review (continued)

In 2019, ForexClear membership increased to 34 members (2018: 32) implemented following long-standing requests from members as US$18.0 while notional cleared grew by 5% to US$18.0 trillion (2018: US$17.2 it offers them significant netting efficiencies, facilitated by settlement trillion). Of this, US$61 billion was client cleared notional, up in Euroclear, Clearstream or in a CSD of their choice through trillion significantly from the previous year (2018: US$8 billion). TARGET2-Securities (T2S), the pan-European platform for Notional cleared securities settlement in central bank funds. at ForexClear LCH also became the first clearing house to integrate with FX (2018: US$17.2 trillion) Connect TradeNeXus, State Street’s FX trading platform. Users can Sponsored Clearing continues to extend the full benefits of clearing now benefit from direct access to LCH’s clearing service, via to buy-side users in LCH Ltd, with roll out to LCH SA a focus in 2020. workflows integrated into TradeNeXus. EquityClear and Listed Derivatives ForexClear’s compression service volumes gathered momentum EquityClear clears for more than 20 different trading venues, 698 with US$48.1 billion in notional compressed over the year demonstrating our commitment to an Open Access approach. (2018: US$4.8 billion). The number of trades cleared in 2019 fell by 14% to 698 million million (2018: 810 million), due to a challenging global equity market in the Trades cleared at The Uncleared Margin Rules (UMR) continue to provide economic year. In Q1 2019, EquityClear SA successfully extended its service EquityClear incentives for institutions when they clear their FX trades and we to offer the clearing of main market Euronext stocks traded on (2018: 810 million) expect to add more members, and especially clients to this service Turquoise and hopes to further its reach by offering clearing for as counterparties come into scope of the UMR requirements. In additional trading venues in 2020. 2020, we expect to add Non-Deliverable Options to our list of cleared FX products, as well as connecting with more execution platforms. The Listed Derivatives venues cleared by LCH include CurveGlobal and Euronext Derivatives Markets and expects to begin clearing for CDSClear Oslo Bors Derivatives markets in 2020. In 2019, the number of CDSClear is the fastest-growing global CDS clearing service and contracts cleared decreased by 5% to 144.7 million (2018: 152.9 continues to offer its users opportunities to gain capital efficiencies million). Clearing of London Stock Exchange Derivatives Market through clearing across the widest range of CDS products; with (LSEDM) contracts ceased in 2019, as they were withdrawn from almost 100 index series and more than 500 single name CDS the trading platform. contracts eligible for clearing. CDSClear is also the only CCP worldwide which offers clearing of Credit Index Options with over Net Treasury Income 80 contracts eligible for clearing. ––Net Treasury Income for LCH in 2019 increased by 18% to £206 million (2018: £175 million) on a reported basis and up In 2019, total notional cleared increased to €759 billion 17% on a constant currency basis (2018: €612 billion) supported by the introduction of mandatory clearing for Category 3 counter parties. Membership rose in 2019, The increase in Net Treasury Income in 2019 was largely driven by with new members joining and some members adding the increase in average cash collateral held, which rose by 13% to supplementary memberships for additional entities, which do not €98.4 billion (2018: €86.7 billion), which in turn is primarily driven attract an additional membership fee, bringing the total number of by volumes cleared and market volatility, and in 2019, a change in members up to 26 (2018: 16) and providing increased liquidity to the risk methodology for SwapClear to ensure the client clearing service. Further members are expected to join in 2020. Client service was adequately protected from defaults resulted in clearing at CDSClear also grew in 2019, with more than 250 client increased initial margin requirements. In 2019, LCH has worked to entities live on the service and €42.9 billion of notional cleared by increase its capacity with investment counterparties as well as clients, an increase of 51% from 2018. expand the range of products they can invest in to allow for continued asset allocation optimisation. Credit Index Options notional cleared increased to €8.5 billion (2018: €1.8 billion). This performance is reflected in the use of CDSClear’s electronic exercise platform for Credit Index Options, launched in November 2018.

Non-OTC Clearing Cash collateral held ––Non-OTC derivatives clearing revenue was up 3% to £140 million, an – daily average increase of 4% on a constant currency basis (2018: £136 million) 18% € bn 98.4 increase in Net RepoClear 84.5 86.7 Treasury Income In 2019, RepoClear reached a record nominal value cleared of €106 67.0 in 2019 trillion (2018: €98.7 trillion). Volumes in RepoClear rose 7%, largely 56.9 as a result of strong growth in the underlying Repo market, particularly in Europe as a result of excess liquidity, and members seeing netting and other benefits from the newly consolidated Euro debt pool in LCH SA. 2015 2016 2017 2018 2019

In early 2019, LCH successfully consolidated a large majority of Euro debt clearing into LCH SA. This consolidation was

London Stock Exchange Group plc 32 Annual Report 31 December 2019 Strategic Report Segmental review

Post Trade Services CC&G and Monte Titoli

Sub-segment Introduction Post Trade Services in Italy are crucial to the securities trading industry. Our post trade businesses, CC&G and Monte Titoli, provide the markets with settlement, depository, custody, risk, £152m clearing and central counterparty (CCP) services to mitigate risk 2018: £145m and ensure the efficient running of capital markets. These services become increasingly important in volatile market conditions and 1 our continued strong service emphasises the high quality of our risk management and post trade processes.

Revenue drivers CC&G clearing earns revenue by charging a fee per equity trade or derivative contract cleared, with fees based on notional for fixed income. Net Treasury Income is earned on cash collateral held for margin and default funds.

Monte Titoli settlement revenue is earned by charging a fee per trade 2 settled and lodged for registration into the buyer’s name. Its custody fees are paid by companies based on market capitalisation and issuance, with fees paid by intermediaries including banks and CCPs 3 based on balance of assets held in custody.

Further information As of 1 January 2020, the Group’s Post Trade businesses, that were previously reported separately as LCH and Post Trade Italy, were aligned, in a manner consistent with the necessary regulatory 1 28% oversight, into one Post Trade division. Post Trade now includes LCH Clearing (CC&G) Group, our Italian post trade businesses CC&G and Monte Titoli, and UnaVista, our trade reporting and reconciliation business that 2 40% previously reported as part of Information Services. Settlement, Custody & other (Monte Titoli) For more information on Post Trade Italy, see: www.lseg.com 3 32% Net Treasury Income Market trends and our response for Post Trade Italy can be found on pages 14–20. Profitability of each segment can be found in the Financial Review on pages 53–59. A glossary of terms can be found on pages 204–206.

Highlights CC&G Monte Titoli CC&G Fixed Income Net Treasury Income €25 €3.32 31% billion trillion Notional cleared Annual average assets Average initial margin (2018: €20 billion) under custody up to €14.4 billion (2018: €3.29 trillion) (2018: €11.1 billion)

London Stock Exchange Group plc Annual Report 31 December 2019 33 Segmental review (continued)

Post Trade Services Italy Net Treasury Income 91 ––Net Treasury Income up 14% to £49 million (2018: £43 million), ––Post Trade - Italy income up 5% to £152 million and up 15% on a constant currency basis Number of clearing members in CC&G (2018: £145 million) on a reported basis and up 6% on a constant currency basis Net Treasury Income is the income generated by CC&G investing the cash collateral it holds. In 2019, average daily initial margin Clearing (CC&G) increased by 31% to €14.4 billion (2018: €11.0 billion). ––Clearing revenue up 3% to £43 million (2018: £41 million) and up 4% on a constant currency basis Settlement, Custody and other (Monte Titoli) ––Settlement, Custody and other revenue was broadly flat at £60 CC&G’s revenue in 2019 grew, in part, due to an increased notional million (2018: £61 million) and up 1% on a constant currency basis for fixed income products cleared, which rose by 26% to €25 billion (2018: €20 billion). This offset lower volumes of equity trades and Monte Titoli manages a wide range of financial instruments, with derivative contracts cleared, which were down 11% to 99.5 million €3.32 trillion assets under custody (2018: €3.29 trillion). In 2019, (2018: 111.9 million). 44.4 million settlement instructions were processed down 2% on the previous year (2018: 45.4 million). Monte Titoli continues to CC&G continues to engage with both domestic and international provide an efficient settlement system, with a year-end settlement clients with 38% of its 91 clearing members being international, rate of approximately 96% of settled transactions (2018: 97%). demonstrating global reach. In previous years the number of clearing members reported has included clients, on a consistent Monte Titoli was granted a licence to operate under European basis in 2018 there were 83 members. CSD Regulation (CSD-R) as of 18 December 2019. CSD-R aims to harmonise certain aspects of the settlement process and The UK’s withdrawal agreement from the EU provides a transition provide a set of common requirements for CSDs operating period until 31 December 2020. Both the UK and EU hope to securities settlement systems across the EU. conclude assessments of future regulatory equivalence by June 2020. These decisions will impact equivalence for EU CCPs Monte Titoli continues to make good progress on its Agility operating in the UK and UK CCPs operating in the EU. The and Growth 2020 programme. The three-year plan, which began absence of an equivalence decision by the end of the transitional in 2018, has two pillars: the automation of core processes and period may impact LSEG’s Post Trade division due to EU clients innovation. The second phase of this programme has seen being unable to access LCH Ltd and UK clients being unable to Monte Titoli leverage some of the big data solutions access LCH SA and CC&G. implemented in 2018 and begin exploring opportunities in areas such as machine learning.

CC&G – Equity trades and CC&G – Initial margin held Monte Titoli – Monte Titoli – derivative contracts cleared € bn (average daily) Settlement instructions Assets under custody m 14.4 m € tn (annual average) 129.6 12.3 12.1 60.3 33.3 3.27 3.29 3.32 120.1 11.1 3.17 108.3 111.9 11.0 99.5 43.3 44.6 45.4 44.4

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

London Stock Exchange Group plc 34 Annual Report 31 December 2019 Strategic Report Segmental review

Capital Markets

Sub-segment Introduction The Group’s capital markets businesses facilitate a wide range of domestic and international companies’ capital raising by providing well-regulated and highly liquid markets across our London, Milan £426m and pan-European trading platforms. 2018: £407m Our range of primary markets provides choice for issuers and 1 investors, enabling companies to raise equity capital or issue debt efficiently and increase their visibility with a wide group of customers and investors.

Our secondary markets create a deep pool of liquidity and allow active and efficient trading of equity, fixed income and derivative products through our high-performance trading platforms.

Revenue drivers Revenues from Primary Markets are derived from fees charged to equity issuers seeking admission to London Stock Exchange and 3 Borsa Italiana. The fees are charged based on the market value of securities listed. Issuers of equity securities are subsequently subject to annual fees. On London Stock Exchange, fees are also 2 charged for companies carrying out further equity fund raisings once they are listed. For fixed income securities, a flat fee is charged for each new bond issued onto our markets.

In Secondary Markets a fee is charged based on value traded for 1 35% UK equities, Turquoise and MTS fixed income markets. On other Primary Markets markets, Italian equities, derivatives and retail fixed income, a fee is charged per trade or contract traded. Revenues are also generated 2 35% from membership fees, reporting fees for trades carried out away Secondary Markets from the order book and market maker security registration fees. – Equities 3 29% Further information Secondary Markets For more information on our Capital Markets division, see: – Fixed Income, Derivatives and Other www.lseg.com, www.londonstockexchange.com and www.borsaitaliana.it

Market trends and our response for Capital Markets can be found on pages 14–20. Profitability of each segment can be found in the Financial Review on pages 53–59. A glossary of terms can be found Note: Percentages may not equal 100% due to rounding on pages 204–206.

Highlights Primary Markets Secondary Markets Secondary Markets Sustainability Equities Fixed Income, Derivatives and Other £23.4 £4.7 €113 £37.4 billion billion trillion billion Total raised by UK average daily value traded MTS Repo value traded Total amount raised from new and further issues (2018: £5.8 billion) (2018: €87 trillion) green, social and sustainable (2018: £28.7 billion) bonds on our markets

London Stock Exchange Group plc Annual Report 31 December 2019 35 Segmental review (continued)

Capital Markets In November, LSEG announced a strategic partnership with £4.0 PrimaryBid, a service that connects publicly listed companies ––Capital Markets revenue up 5% to £426 million (2018: £407 million) with retail investors, offering equal access to capital markets billion on both a reported and constant currency basis transactions including IPOs to both institutional and retail clients. New capital raised on our AIM growth Primary Markets In October, London Stock Exchange launched the Green Economy markets Summary Mark, recognising equity issuers on the Main Market and AIM with (2018: £6.7 billion) ––Primary Markets revenue up 34% to £151 million (2018: £113 green revenues of 50% or more, identified by the Green Revenues million), also up 34% on a constant currency basis data model developed by FTSE Russell. As at the end of 2019, a total of 75 issuers had received the Green Economy Mark. For more ––Primary Markets revenue increased by c.£32 million in H1 2019 information on the Green Economy Mark see page 14 of our due to a one-off change in estimate relating to IFRS 15. Adjusting Corporate Sustainability report. M £405 for this, Primary Markets revenue for the year rose 6% Despite a challenging global equity market in 2019, our Primary Our ETP platform in London saw a softer market in 2019 with 191 billion Markets saw strength in international companies listing in London, new ETPs listed (2018: 323) whereas our Italian ETFPlus market set a Total raised on our making up almost a quarter of new issuances for the year, and with new record of 217 new ETPs (2018: 191). The total number of ETPs bond markets a record number of admissions to AIM Italia, our Italian growth across our markets at the end of 2019 stood at 2,822 (2018: 2,831) (2018: £410 billion) market. In total, 109 companies were admitted across our markets with Goldman Sachs, the Kuwait & Middle-East Financial Investment in 2019 (2018: 176), raising a total of £6.8 billion (2018: £8.4 billion). Company and GraniteShare issuing their first ETPs in London, and Further offerings amounted to £16.6 billion (2018: £20.3 billion) as Vanguard and Goldman Sachs as new issuers on ETFPlus. listed companies continued to access the deep pools of capital available through our venues. ELITE, LSEG’s international programme to facilitate access to capital for SMEs, saw its community of companies reach 1,400 AIM and AIM Italia continue to perform well with 54 companies companies across 45 countries (2018: 1,000 companies across 40 admitted to these venues over the course of 2019 (2018: 91). Total countries). ELITE continues to expand its global reach, launching capital raised on our AIM markets in 2019 amounted to £4.0 billion ELITE Scotland and ELITE America in the year. Five ELITE (2018: £6.7 billion) of which 83% was through further equity companies joined AIM Italia, taking the total number of IPOs from issuance, demonstrating the long-term relationships that exist ELITE companies on our markets to 29. between AIM companies and their investors. 60% of capital raised in European growth markets in 2019 was conducted via AIM. M We continue to be a leading global venue for international debt fundraising, including issuances in Indian Rupee, Chinese In June, we launched the Shanghai-London Stock Connect with Renminbi, Sukuk bonds and Indonesian Rupiah, raising over £9.3 Huatai Securities raising US$1.5 billion of new capital on the Shanghai billion in 2019. In total, 1,524 bonds were listed on our markets, Segment. After many years of collaboration between the London raising over £405 billion, 45% of which was raised by international and Shanghai stock exchanges, this is the first fungible cross- issuers (2018: 1,972 bonds, £410 billion raised, 47% international). listing mechanism enabling international investors to access China A-shares from outside Greater China and represents the first time foreign companies have the opportunity to list in mainland China.

Equity money raised Market capitalisation of Exchange Traded – Group companies listed – Group Products – Group £ bn £ bn number listed at year end 3,317 42 44 3,188 2,831 2,822 2,897 2,680 2,856 2,482 2,265 2,347 29 26 23

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

London Stock Exchange Group plc 36 Annual Report 31 December 2019 Strategic Report Segmental review

London Stock Exchange launched the Sustainable Bond Market In October we launched the Global Equity Segment (GES) in London, (SBM) in October, building upon the success of its Green Bond offering trading in 95 international securities including US blue 95 Segment, launched in 2015. The SBM includes new dedicated chip and Chinese ADRs during regular London trading hours. This Global Equity Segment segments for social and sustainability bonds, in addition to the segment provides investors the opportunity to reduce time zone launched offering existing Green Bond Segment. The total number of green, social risk in major international stocks whilst accessing exposure to trading in 95 and sustainable bonds listed on our markets as at the end of 2019 global securities. In 2019, since launch, the average daily value international securities was 215, raising £37.4 billion. For more information on the SBM see traded on GES was £15.5 million. We expect volumes to grow page 15 of our Corporate Sustainability report. M during 2020 as investors take advantage of London’s unique time zone, trading expertise and global investor community. Borsa Italiana launched a new bond segment of its ExtraMOT market, ExtraMOT PRO3, for Italian SME companies not listed on Turquoise, our pan-European MTF saw total value traded decline by €103 regulated markets and / or with an issue value of less than €50 36% to €531 billion (2018: €828 billion) with Turquoise Lit activity of million. 161 debt instruments have been listed with over €5 billion €318 billion (2018: €624 billion) declining by 49% as Lit flow tended billion raised in 2019. M towards the primary listing venue. Turquoise Plato’s dark order book, Value traded on Turquoise Plato Europe’s largest dark pool, achieved new records with value traded Block Discovery Secondary Markets up 4% to €213 billion (2018: €204 billion) with around half of this (2018: €93 billion) Equities executed through Turquoise Plato Block Discovery, our MiFID II ––Secondary Markets – Equities revenue down 11% to £151 million compliant mechanism for executing large anonymous block orders. (2018: £169 million), also down 11% on a constant currency basis In March, the Dutch authorities granted Turquoise a licence to operate an MTF in the Netherlands. In July, Turquoise removed more Equity trading in the UK was down 18% to £1.19 trillion in 2019 than 200 Swiss stocks after the EU and Switzerland did not agree to (2018: £1.46 trillion), while average daily value traded was down renew equivalence and in September, Turquoise announced changes 18% to £4.7 billion (2018: £5.8 billion). In Italy, the average daily to its tariff structure that increased the level of rebates to liquidity number of trades decreased by 10% to 255,000 (2018: 282,000). providers for passive limit orders above certain thresholds. In Activity levels across both of these markets were broadly reflective December, Turquoise NYLON, Turquoise’s equity derivatives trading of lower volumes in the wider global equity markets. solution, launched an innovative cleared contract, which combines the economics and flexibility of OTC swaps with the capital Trading on the Shanghai-London Stock Connect was launched efficiencies of central clearing. alongside Huatai Securities’ listing in June 2019, with an average of US$5.9 million value traded per day, this was one of the top traded The Group remains the largest exchange by turnover and number depository receipts on the International Order Book (IOB). 32 LSE of trades for ETP order book trading in Europe, with £196 billion member firms have already traded on the Stock Connect service total value traded across our markets in the year (2018: £202 with more expected over the course of 2020. billion). This was down 3% compared with the strong trading seen in 2018. ETP trading accounts for around 9% of equity trading on LSE and 16% of equity trading on Borsa Italiana. ETPs trade on our platforms across four currencies including Chinese Renminbi.

LSE – average daily Borsa Italiana – average Turquoise lit book Turquoise dark book value traded daily number of trades – total value traded – total value traded £ bn thousands € bn € bn 5.8 295 1,224 213 280 276 282 204 5.1 5.3 255 183 4.9 4.7 973 159 810 121 624

318

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

London Stock Exchange Group plc Annual Report 31 December 2019 37 Segmental review (continued)

Fixed Income, Derivatives and Other MTS is our leading regulated electronic trading platform for €237 ––Secondary Markets – Fixed Income, Derivatives and Other European wholesale government bonds and other types of fixed revenue was broadly flat at £124 million (2018: £125 million), income securities. Value traded in MTS Repo increased 30% to billion and up 1% on a constant currency basis €113 trillion (2018: €87 trillion) as European repo markets saw strong activity across the year due to continued excess liquidity, a Value traded on our Our retail bond markets include MOT in Italy, which is the most stable interest rate environment and the compression of spreads retail bond markets liquid and heavily traded retail fixed income platform in Europe, between repo rates for core and periphery countries in the (2018: €205 billion) EuroTLX and the UK Order Book for Retail Bonds (ORB). Across the Eurozone. MTS Cash and BondVision’s value traded ended the year year, these platforms continued to provide liquid markets despite down 4% to €3.2 trillion (2018: €3.3 trillion). the prevailing low interest rate environment. Total trades for the year were 6.0 million (2018: 5.1 million) with value traded at €237 MTS extended the number of countries on its Cash market to 21, billion (2018: €205 billion). 5.7 with the launch of MTS Cyprus in November 2019. This is the first designated electronic trading platform for Euro-denominated Derivative volumes fell 23% in the year owing to challenging million Cypriot government bonds. MTS is exploring further opportunities markets in the first half of 2019 with 33.1 million contracts traded Interest rate derivative to provide infrastructure for other global markets to generate (2018: 42.8 million). Volumes were primarily executed on IDEM, the lots traded on recurring licence based revenues. In 2018, MTS launched Group’s Italian derivatives market which saw trading volumes of CurveGlobal BondVision Repo, a Dealer to Client (D2C) repo solution in 30.7 million contracts (2018: 36.2 million). As planned, the London (2018: 3.3 million) preparation for upcoming EU regulation, Securities Financing Stock Exchange Derivatives Market (LSEDM) has been rebranded Transactions Regulation (SFTR), which will require participants to CurveGlobal Markets as of 24 June 2019, following the withdrawal report repo transactions. Development has taken place throughout of IOB Equity Derivatives contracts on 21 June 2019 and the the year, alongside record volume activity towards the end of 2019, subsequent withdrawal of Norwegian equity derivatives from with a final release expected in 2020 ahead of the implementation 29 November 2019. of SFTR on 11 April 2020. In July 2019, Maria Cannata was announced as the new President of MTS. With 18 years of CurveGlobal, our interest rate derivative trading platform operated experience at the Italian Ministry of Economy and Finance, Maria as a joint-venture, saw over 11 million lots trade on the platform will further strengthen MTS’ relationships with the market. since launch with open interest at 395,000 lots at the end of the year (2018: 348,000), mostly in European Short-Term Interest Rate futures (STIRs). During 2019, CurveGlobal continued its innovation by launching One-Month SONIA contracts on the platform to aid the UK’s transition from a LIBOR benchmark. Alternative interest rate products continue to be an area of focus, with further short term interest rate products to be launched later in 2020. Towards the end of 2019, CurveGlobal introduced a unique uncapped pre-paid trading scheme allowing its member firms and their clients to execute an unlimited number of lots in any CurveGlobal interest rates derivatives products over a one or three year period. As a minority shareholder, the results of CurveGlobal are not consolidated by the Group.

Exchange Traded Products MTS Repo – total value traded € tn £ bn 113.5 202 196 186 178 88.9 84.4 87.4 152 77.7

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

London Stock Exchange Group plc 38 Annual Report 31 December 2019 v v

Strategic Report Segmental review

Technology Services

Introduction In 2019, using a cloud-based environment for the first time, LSEG LSEG Technology provides the Group and its customers, including Technology was able to successfully launch a low-latency, resilient banks, specialist trading firms and other capital market venues and scalable matching engine for Atom Asset Exchange (AAX), with resilient, high-speed, low-latency trading platforms, post a 24-hour digital asset exchange. This demonstrates the trade platforms, real time market data and surveillance products opportunities for our technology outside traditional marketplaces and services. and in the cloud.

Revenue drivers LSEG Technology also successfully implemented Millennium Technology Services earns revenue through the sales of capital Exchange and Millennium Surveillance platforms for the markets software via licensing arrangements as well as Johannesburg Stock Exchange (JSE) for its Equity, Equity implementation fees and ongoing maintenance. The business also Derivatives and FX Derivatives markets in 2019. This new release earns fees for network connections, server hosting and systems represented a major upgrade, delivering operational efficiencies to supplied by Group businesses. both users and the wider market across all derivatives asset classes with the ability for JSE to extend to other products in the future. Further information For more information on our Technology division, see: In December 2019, the Securities Clearing Corporation of the www.lseg.com Philippines (SCCP), a wholly-owned subsidiary of the Philippine Stock Exchange selected LSEG Technology’s Millennium Post Trade Market trends and our response for Technology can be found on product to improve its post trade processes, providing an efficient pages 14–20. Profitability of each segment can be found in the and effective, clearing, settlement and risk management solution. Financial Review on pages 53–59. A glossary of terms can be found on pages 204–206. Through our Millennium Exchange technology, our UK cash equity trading platform exhibited 99.99% uptime during the year (2018: Performance during 2019 99.99%). The platform experienced a total downtime of 67 minutes ––Technology revenue increased by 2% to £66 million (2018: £65 in the year as a result of a technical software issue that affected million) on a reported basis and 1% on a constant currency basis trading in certain securities.

During the year the Group continued to pursue its cloud-first strategy, with the aim of leveraging the potential of cloud technologies to reduce operational costs, deliver system scalability and support our growing global footprint. Our aim is to operate a significant proportion of service delivery and corporate computing from the cloud by 2021.

Highlights Technology £66 40+ 99.99% million Technology revenue LSEG Technology delivers Uptime of the (2018: £65 mil) innovative technology solutions UK equity market to over 40 capital markets (2018: 99.99%) organisations globally

London Stock Exchange Group plc Annual Report 31 December 2019 39 Supporting sustainable growth

Why Corporate Sustainability matters LSEG believes that good Corporate Sustainability (CS) practices are fundamental to our continued success and £4 delivery of enhanced business performance. We aim to support financial stability and sustainable economic growth by enabling businesses and economies to fund innovation, manage risk and create jobs. This corporate trillion purpose encapsulates not only commercial and performance objectives but also Environmental, Social and Size of investment opportunity Governance (ESG) responsibilities. Accordingly, we set our CS strategy in line with our wider business strategy. from transition to green economy To develop and achieve the Group CS objectives and targets, we established a Group CS Committee in 2011. (Source: FTSE Russell Investing in the global green economy report 2018)

Sustainability Governance

Our approach to Corporate Sustainability is overseen by the LSEG Sustainability Governance Board. The CEO is responsible for sustainability matters, while the Group CFO, who is a Board member, has responsibility for the LSEG Board environmental policy. In 2019, the Board met four times to discuss ESG matters.

Our sustainability strategy is driven by the Group CS Committee, LSEG Executive Committee on which Executive Committee members sit. Delivery of the sustainability programme is carried out by the Sustainable Business team, reporting to the heads of Investor Relations and LSEG Corporate Sustainability Committee Government Relations and Regulatory Strategy. Chair, Group Chief Risk Officer

Each pillar lead has established working teams drawn from across the Group, two of which also have oversight of related CS initiatives, shown in the diagram to the right, such as the Diversity and Programme Delivery Oversight Inclusion (D&I) committee which feeds into the ‘Our People’ Group Head of Investor Relations; working team. Group Head of Government Relations and Regulatory Strategy Programme Delivery Risks Head of Sustainable Business; Sustainability Manager We continue to assess the materiality of ESG and related risks to LSEG and to increase our focus on embedding these risks into our Enterprise Risk Management Framework. While we recognise the importance of Environment, Human Rights and Anti-bribery and Working Teams corruption (ABC) risks, these are not currently considered principal risks for the Group. Some climate-related risks have been Our Markets Our Services Our People Our Communities categorised as emerging risks and it is acknowledged that they are Group Director, Group Director, Group Head of Group Chief inherently linked to other strategic, financial and operational risks. Capital Markets Information Services Human Resources Risk Officer Additionally, some social matters are still identified under the Employees principal risks for the Group in the Principal Risks section of the report. D&I Foundation

In 2019, further steps have been taken to cement our approach, Women Environmental including the formal training of risk champions on ESG-related Inspired Management risks, and the determination of key scenarios to inform Task Network (WIN) Group (EMG) Force on Climate-related Financial Disclosures (TCFD) reporting, both facilitated by an independent and external consultancy. More information on our sustainability and climate-related principal risks can be found on page 73.

London Stock Exchange Group plc 40 Annual Report 31 December 2019 Strategic Report Supporting sustainable growth

Our approach to Corporate Sustainability

Our purpose We support global financial stability and sustainable economic growth by enabling businesses and economies to fund innovation, manage risk and create jobs.

CS strategy Convene Grow Disclose Transition Develop Sustain Leveraging our Small and Providing We work with Employ and We will help the We have six impact areas that position at the medium-sized investors with issuers and invest in the less advantaged direct our focus on all of our centre of capital enterprises information and investors to development of a in communities CS activities. markets to drive (SMEs) raise tools to assess provide solutions highly diverse worldwide to global growth capital and fund the ESG that accelerate global workforce develop business investments performance of and manage the to deliver on our skills and to to create companies transition to a low sustainable vision support the employment to facilitate carbon and environment worldwide engagement and sustainable investment economy approaches

CS pillars Our Markets Our Services Our People Our Supporting the sustainable Enabling informed investment Recruiting and Communities Our strategy is executed growth of companies for long-term decisions and transparent developing Empowering through four pillars, which we economic prosperity markets operations diversified talent to people, report progress against. fulfil their potential enriching communities

See page 42 See page 42 See page 43 See page 47

These two pillars represent areas where we can have the biggest impact as a business, using our unique skills and position at the centre of capital markets to make a meaningful difference. On the following pages, we summarise our approach and performance in these areas. Further information can also be found within our segmental reviews in this report and CS report.

Other CS considerations We aim to ensure our corporate behaviour and actions are consistent with good practice while generating long-term value creation.

Further information In this section we provide a high-level overview of our CS activities in 2019. For more detail, see our separate CS report at www.lseg.com/about-london- stock-exchange-group/corporate-sustainability

London Stock Exchange Group plc Annual Report 31 December 2019 41 Supporting sustainable growth (continued)

Our Markets

As a fundamental component of the economy, our Highlights in 2019 markets, built on transparency and trust, help ––Launch of the Sustainable Bond Market and Green Economy Mark customers optimise their capital resources and let (see box below) businesses thrive. ––A record 79 new ESG ETFs were listed on our markets Our markets support sustainable growth by providing a platform ––Borsa Italiana launched a new segment of its ExtraMOT for funding global businesses, including access to funding for market for the growth of small and medium-sized companies SMEs, through our AIM and ELITE programmes, as well as creating a marketplace for green and sustainable companies, funds and fixed income securities.

Our Markets in action 75 Sustainable Bond Market and Green Companies on our Economy Mark launch London markets receiving Green In October 2019, London Stock Exchange launched the Economy Mark Green Economy Mark, recognising equity issuers on London Stock Exchange and AIM with green revenues of 50% or more using the Green Revenues data model developed by FTSE Russell, and the Sustainable Bond Market (SBM) building upon the success of London Stock Exchange’s 215 Green Bond Segment, launched in 2015. The SBM includes Companies on the new dedicated segments for social and sustainability bonds, Sustainable Bond in addition to the existing Green Bond Segment. Market

Our Services

The Group supports informed and sustainable Highlights in 2019 investment decisions by providing global and ––LSEG acquired Beyond Ratings and FTSE Russell launched the multi-asset class indices, analytics and data Climate Adjusted World Government Bond Index (Climate WGBI) €5.8 (see box on next page) solutions across the financial markets value chain. billion This is supported by our philosophies of customer ––FTSE Russell launched the FTSE Custom Developed Ex Korea Commitment to partnership and Open Access that underpin all SDG Aligned Net Tax (DSDG) Index tracking FTSE Custom our operations. ––In early 2020, FTSE Russell launched the FTSE TPI Climate Developed Ex Korea Transition Index in collaboration with TPI and the Church of SDG Aligned Net Tax Our services provide data, indices and analytics to help informed England Pensions Board (DSDG) Index investment decision-making, incorporating ESG data factors.

Further information Our activities under these two pillars are integrated with our operational activities. Further details on our CS progress can be found within our segmental review and CS report, as identified by the following symbols:

M Our Markets S Our Services

London Stock Exchange Group plc 42 Annual Report 31 December 2019 Strategic Report Supporting sustainable growth

Our Services in action Launching the world’s first Climate Risk-Adjusted Government Bond Index

In June 2019, LSEG acquired Beyond Ratings, a specialist ESG research company that specialises in fixed income and government bond ESG solutions. FTSE Russell worked with Beyond Ratings to develop the Climate WGBI, the first government bond index to adjust index weights based on each country’s preparedness and resilience to climate change risk.

Our People The engagement of colleagues is central to our The LSEG Board receives updates on matters relating to organisation. We rely on their skills and experience employees and culture, through the Group Culture Dashboard to deliver on Group strategy and create a culture and other reporting. 25% of roles filled that ensures we can attract, retain and develop See the Board’s report on Corporate Governance on pages internally in 2019 the best talent. 78–84 for further information. LSEG fully recognises its responsibilities to its people and their importance to our business model. The Group continues to nurture Highlights in 2019 a culture that reflects its values of partnership, innovation, integrity ––LSEG launched its Inclusion Network (IN) (see box below) and excellence and supports colleagues’ professional development. ––Launch of Group Culture Dashboard reporting to Group We also continue to support both diversity and wellbeing across Executive Committee and Board our global locations. ––First spring week programme for Science Technology Engineering and Maths (STEM) students ––All Managing Directors received 360° feedback and development programmes

Our People in action Launch of LSEG Inclusion Network (IN)

In 2019, we launched our global Inclusion Network (IN) to act as a forum where all of our Diversity and Inclusion (D&I) networks will be able to share knowledge and collaborate.

“We are fully committed to creating a culture of inclusion and embracing diversity in all forms to allow our people to be their best” David Schwimmer CEO

London Stock Exchange Group plc Annual Report 31 December 2019 43 Supporting sustainable growth (continued)

Our People (continued)

Our culture Our values are, in turn, supported by LSEG Behaviours which are Culture continues to be a key strategic focus for the Group. We aim embedded into everything we do: to develop and embed a unified culture across our businesses, ––Focusing on Results: We pursue business goals, take 84% supporting our vision: ‘to become the leading global financial accountability and drive success of respondents that markets infrastructure group’. During the year, the CEO and agree people from Executive Committee (ExCo) continued the development of a culture ––Using Commercial Judgement: We know the business, think all backgrounds of collaboration, innovation, feedback, learning and inclusion. globally and apply a commercial mindset feel welcome ––Creating Value: We identify opportunities and innovate to create An action plan to support this includes: sustainable value for LSEG and its customers ––Working with Managing Directors (MDs) across the Group to ––Leading Change: We manage change, provide the context for embed new ways of working, with performance objectives change and show adaptability further developed to support the delivery of the Group’s strategic objectives ––Building Effective Relationships: We understand and address stakeholder needs, collaborate with and influence others ––Making behaviour a key factor in performance assessment and using insights from 360° feedback to strengthen development ––Developing Talent: We develop ourselves and others and build reviews and plans high performance teams ––Creating an environment of continuous learning and development The introduction of the LSEG Behaviours as part of the Futures for all employees through the Futures career framework to career framework provides us with a strong foundation on which encourage and support individual growth and career development to build. We are better able to articulate what we expect from individuals at every career stage in terms of skills, knowledge These actions are supported by a strong set of values that apply and behaviours. to all parts of the Group: ––Integrity (my word is my bond): Underpins all that we do – from In 2019, we developed a Culture Dashboard to measure and assess our commitment to building and supporting global markets our culture and ensure full alignment to the Group’s values and based on transparency and trust to every transaction across our behaviours. The Dashboard provides the Board and ExCo with a business with each stakeholder quantitative way to measure and assess progress over time, using data gathered from our ‘Have Your Say’ employee engagement ––Partnership (we collaborate to succeed): We pride ourselves on survey and other sources. working together as proactive partners, building positive relationships with our colleagues, customers, investors, regulators, The Dashboard focuses on five key areas: governments and shareholders, for our mutual success and the benefit of all ––Recruitment & On-Boarding: We recruit individuals with the right skills, behaviours and mindset to support our strategy ––Innovation (we nurture new ideas): We are ambitious and forward-looking market innovators, driven by fresh thinking that ––Performance & Development: We set individual goals that are has kept us ahead of change. We invest to make sure that our aligned with enterprise-wide objectives and supported by a markets and services are constantly developing and evolving with strong organisational learning culture advances in technology ––Talent & Mobility: We identify, nurture, and retain talent, ––Excellence (we are committed to quality): We are committed to promoting internal mobility to support opportunities across developing talented teams who deliver to the highest standards in the Group all that we do. By collaborating, we will sustain industry-leading ––Diversity & Inclusion: We encourage an inclusive environment, levels of excellence where diverse perspectives are welcomed, and all colleagues can be their best selves at work ––Leavers: We use the insights from our leavers to improve future recruitment and reduce turnover

London Stock Exchange Group plc 44 Annual Report 31 December 2019 Strategic Report Supporting sustainable growth

The table below shows our performance against one of the Learning and Development indicators from each area from the Group Culture Dashboard: We have rolled out a range of initiatives in 2019, including: ––Introducing a range of online training tools, with over Focus area Indicator 2019 2018 2017 3,300 hours of training accessed in the first three months 300+ % of new joiners Mentoring partnerships ––Extending our global mentoring programme and during the Recruitment & who understand supported in 2019 On-Boarding LSEG’s values 99% 97% N/A1 year we supported more than 300 mentoring partnerships Performance & Hours spent across 10 countries Development on training 74,770 63,150 41,675 % of roles ––Rolling out 360° feedback and bespoke development Talent & Mobility filled internally 25% 23% 14% programmes to all our MDs % of respondents ––Introducing our global management development programme, that agree people Diversity & from all backgrounds with half of our line managers attending the programme in 2019 Inclusion feel welcome 84% 81% N/A1 % of leavers that cited Engaging our people work-life balance as An annual engagement survey enables colleagues to share their primary reason views on what it is like to work for LSEG and provides a clear Leavers for leaving 5% N/A1 7% indicator of employee engagement. The overall response rate of 1. Survey data from 2017 not available 84% in 2019 was our highest to date. The Engagement Index score Attracting the best talent of 81%, up six points from 2018, provides strong evidence that our Our Graduate and Early Career Programmes continue to help fuel our colleagues care about the future of the Group and take pride in the growth and diversification. We have 39 graduates on programmes organisation as a place of work1. globally, and this year provided over 150 internships across six locations. Throughout 2019 we held events to encourage women into As well as the annual employee engagement survey, feedback finance and technology, resulting in 54% female representation comes through: a colleague forum which is led and attended by across the global graduate class. In 2019, we also ran our first elected volunteers from the workforce; townhalls and ExCo programme for first-year students studying STEM subjects to meetings which are open to all employees and held regularly encourage broader engagement earlier in the pipeline of throughout the year; and an Employee-Board consultation recruitment. This is being expanded in 2020. process which was launched in London in 2019. 1. “I care about the future of the Group” (94%) and “I am proud to say I work Supporting our people in their careers here” (90%) The most recent employee engagement survey results confirm Diversity and Inclusion that career progression and access to training and development Colleagues are recruited and helped to develop their are still significant drivers of engagement. careers regardless of age, gender, nationality, culture or personal characteristics. We increased our focus on supporting internal mobility and improving our succession planning in 2019, with 25% of roles filled The Diversity and Inclusion (D&I) Committee is chaired by our by existing employees. Chief Risk Officer and meets quarterly to review strategy and progress. In 2019, we launched our global Inclusion Network (IN) to act as an umbrella network for a number of groups.

Training hours Roles ﬁlled internally 2019 74,770 2019 25% 2018 63,150 2018 23% 2017 41,675 2017 14%

London Stock Exchange Group plc Annual Report 31 December 2019 45 Supporting sustainable growth (continued)

Our People (continued)

Gender diversity We go beyond UK statutory disclosure requirements to increase The Group was an early signatory of HM Treasury’s Women in transparency, provide a more accurate picture of our gender pay Finance Charter in the UK, and we set ourselves a stretch target of gap and establish a more meaningful baseline against which to 41% reaching 40% female representation in our senior leadership track progress. Our global gender pay gap mean stood at 23% and Female candidates population by the end of 2020. We have made good progress and are median 10% in 2019. The biggest factor behind our gender pay hired externally at committed to working further towards this target. The Hampton- gap continues to be the fact that there are fewer women in senior senior manager level Alexander report recognised the Group for making significant positions. A report on gender pay gap was published on 16 March improvements that have led to women comprising 31% of our Board. 2020. This report can be found at: www.lseg.com/about-london- stock-exchange-group/corporate-sustainability Following a focus on a number of initiatives, the proportion of female candidates hired externally rose from 37% in 2018 to 38% Rewarding our people 137% in 2019. At senior manager level this proportion was 41%. LSEG’s reward strategy focuses both on the short term, through an annual bonus scheme linked to our global performance Share price appreciation At LSEG, we conduct equal pay analysis as part of our annual pay management approach, and on the medium term through share for employees’ review process and are confident that we do not differentiate pay schemes aimed at senior management and the wider workforce. Sharesave maturities between men and women who perform equivalent roles. We have a The Long-Term Incentive Plan, details of which can be found on Group-wide reward framework, which establishes the page 108, aligns the performance and reward of senior compensation structure, elements and leverage for each stage in management with the Group’s ongoing performance and growth. our career framework. This is used to review any potential gender bias as part of our annual pay review process. However, we Sharesave, our principal employee share ownership scheme, is acknowledge that we do have a gender pay gap, due to the available to all permanent employees across France, Hong Kong, unequal distribution of men and women across the company. Italy, Malaysia, Sri Lanka, the UK and the US. Colleagues can save up to £500 or equivalent per month, with the option after three years of using their accumulated savings to buy LSEG shares at a Gender breakdown discounted price. In 2019 we also launched SharePurchase to LSEG plc Board permanent employees in Australia and Romania. Under this plan, colleagues can purchase up to £500 per month of LSEG shares and 2019 4 9 are awarded additional shares which vest after the completion of a 2018 3 10 three-year plan cycle. LSEG Subsidiary Board1,3 During 2019, almost 600 employees across six countries 2019 31 132 benefited from Sharesave maturities including share price 2018 22 116 appreciation of 137%, reflecting the Group’s performance over ExCo and Leadership Teams2,3 the previous three years. Participation was extended further, with almost 1,100 employees joining the 2019 scheme, increasing 2019 140 291 overall participation to over 59% of eligible employees. 2018 134 295

All other colleagues We endeavour to develop a remuneration policy that is aligned with good market practice and corporate governance 2019 1,577 2,957 2018 1,435 2,723 developments and which continues to promote the long-term success and cultural agenda of the Group; both for LSEG as a Total4 standalone company and in the event that the proposed 2019 1,717 3,248 transaction of Refinitiv completes. The Remuneration Committee 2018 1,569 993 1986 2979 3972 3,018 4965 continues to place great importance on ensuring that there is a clear link between pay and performance, including a focus on culture, adherence to the Group’s risk framework, and that our Female Male remuneration outcomes are reflective of this wider context. More information on our Remuneration policy can be found on pages 1. Mix of employees and Non-Executive Directors 2. Executive Committee and Leadership Teams in LSEG 98–128 of this report. 3. The LSEG Subsidiary Board members and the members of the Executive Committee and Leadership Teams together comprise the ‘Senior Managers’ Supporting our people’s wellbeing for the purposes of section 414C(8)(c)(ii) of the Companies Act 2006 4. Total comprises ExCo and Leadership Teams and All other colleagues LSEG’s Wellbeing strategy is designed to provide a dedicated Note: Figures as of year ended 31 December 2019. framework of awareness and support centred around five pillars: Emotional, Physical and Financial Wellbeing, Workplace choice and Social Purpose.

During 2019 a range of programmes and initiatives focused on these topics were rolled out across the Group. For more information please see our CS report (pages 26–27)

London Stock Exchange Group plc 46 Annual Report 31 December 2019 Strategic Report Supporting sustainable growth

Our Communities As our global presence grows, we monitor our impact Highlights in 2019 on the communities around us and how it aligns with ––LSEG Foundation donated £1.4 million to charities in 2019 our strategy and values. We aim to promote ––Launched volunteering initiative for SMEs in partnership with sustainable practices and support local communities Centre for Entrepreneurs as part of their NEF Fast Track programme and the environment where we have a significant ––LSEG Foundation Challenge launched in October 2019 business presence. ––Lindenfeld Association Ajungem Mari chosen as Romania charity partner

Our communities in action LSEG Foundation 20% of our global workforce London Stock Exchange Group Foundation provides a volunteered in 2019 primary channel for the Group’s charitable giving as well as a focal point for staff engagement with local charities. In 2019, the Group donated £1,616,000 to the LSEG Foundation, and £130,000 directly to a number of charities. The Foundation’s approach and positioning is aligned with the overall Group CS strategy, while recognising the global reach of LSEG’s business model. More information on this can be found in the CS report on page 33.

Our wider responsibility In addition to activities that specifically aim to deliver Its responsibilities also include: our CS strategy, we also aim to ensure that our own ––Increasing efficiency and reducing consumption in areas including business activities are consistent with good practice. energy, water usage, waste management and business travel Environment ––Ensuring that environmental considerations are incorporated in We recognise that we must use resources in ways that deliver the Group’s purchasing and procurement decisions long-term sustainability and profitability for the business and have ––Engaging with clients, suppliers and community partners to regard for impact on the environment. We also take such factors promote environmental best practice into account in developing our products and services. The Group’s primary greenhouse gas (GHG) emissions arise from energy, waste The EMG accurately measure and report on GHG impacts across and water in our offices and data centres around the world, from our property portfolio, including managed offices where possible. staff travel, and indirectly from our supply chain. We are aware of We report beyond the mandatory reporting guidelines to include the risks and opportunities for our business arising from climate Scope 3 emissions, performance is reported quarterly on an change and have developed measures to address them. internal basis, and we annually disclose to CDP, Dow Jones We actively monitor these changes so that we can adapt and Sustainability Indices (DJSI), FTSE4Good and on our website: respond as necessary. www.lseg.com. Managing our environmental impact We have maintained our accreditation for our ISO 14001 We take an active approach to emissions management. Our Environmental Management System by a UKAS accredited body. Environmental Management Group (EMG) guides the Group’s The system currently covers the UK property portfolio and we are environmental strategy, and is responsible for setting assessing expansion to cover further locations. Group-wide targets, managing and seeking to improve our environmental performance. The Group CFO reports to the Board on environmental issues.

London Stock Exchange Group plc Annual Report 31 December 2019 47 Supporting sustainable growth (continued)

Our wider responsibility (continued)

Our targets and progress in 2019 Methodology and verification During the reporting period, we achieved a 41% reduction in our We report all of the emission sources required under the 41% absolute carbon footprint and a 42% reduction in carbon emissions Companies Act 2006 (Strategic Report and Directors’ Reports) per Full Time Employee (FTE). This reduction was primarily due to Regulations 2013. These sources fall within our consolidated Reduction in our our move to 100% renewable electricity. This has been achieved financial statement. We do not have responsibility for any emission absolute carbon through maintaining 100% renewable supplier tariffs for 66% of sources that are not included in our consolidated statement. footprint in 2019 our electricity consumption and the procurement of energy attribute certificates for all other electricity consumption Our emissions are calculated according to an ‘operational control’ (purchased from an internationally recognised trader, member of boundary using GHG Protocol Corporate Accounting and Reporting IETA and CDP gold partner). Energy conservation measures (such Standard (revised edition) and UK Government Environmental as office consolidation projects, LED lighting upgrades, and Reporting Guidelines: Including streamlined energy and carbon decommissioning of legacy servers) have continued in all regions reporting guidance (March 2019). to reduce energy consumption. Throughout 2019 there has also been an increased focus on recycling and waste management. LSEG’s Scope 1, 2 and 3 emissions have been externally verified by SGS against the requirements of the WRI/WBCSD GHG Protocol – LSEG was one of the first companies in the financial services sector Corporate Accounting and Reporting Standard. Conduct of the to commit to a long-term science-based carbon reduction target, verification met the requirements of ISO 14064-3:2006. which is that “We commit to a 40% reduction of our global scope 1 and 2 GHG emissions by 2030 from a 2016 baseline”. As this target More information and full details of our emissions inventory and has been achieved, we continue to work towards the approval of targets can be found in our CS report. Our verification statement is our 2030 targets by the Science-based Targets initiative, therefore, available on our website. in 2020 we aim to achieve a further 2% reduction in Scope 1 and 2 emissions per FTE and per £m revenue and a 2% reduction in waste per FTE compared to 2019. We will fully assess the actions needed to achieve carbon neutrality, including offsetting unavoidable air travel emissions through Gold Standard carbon credits. More information on this can be found in our CS report.

Global 2019 GHG Emissions

tCO2e – Tonnes of carbon dioxide equivalent 2019 2018 % change Total Group Carbon Footprint1 10,604 17,864 (41) ––per m2 0.11 0.20 (45) ––per FTE 1.95 3.37 (42) ––per £m Revenue 4.58 8.37 (45) Energy Consumption (kWh)2 71,160,796 69,527,917 2 Scope 13 1,816 1,414 28 Scope 24 0 7,132 (100) Scope 35 8,788 9,319 (6) Renewable Electricity6 (%) 100 66 52 Energy Consumption (kWh) 45,548,676 45,772,555 (0.5) Scope 1 513 399 29 UK Scope 2 – Market based 0 1,830 (100) Scope 2 – Location based 11,166 12,440 (10) Energy Consumption (kWh) 25,612,121 23,755,362 8 Scope 1 1,303 1,015 28 Rest of Group Scope 2 – Market based 0 5,301 (100) Scope 2 – Location based 6,884 6,728 2 1. All Group totals and electricity breakdowns use market-based Scope 2 emissions factors. Group carbon footprint includes tenant consumption. 2. Electricity, Natural Gas, Diesel, LPG and Fleet Vehicle fuel have each been converted from their respective units to kWh in order to be presented as an aggregate fuel consumption value. Defra GHG Conversion Factors 2019 (Fuel Properties) have been used as the basis for this conversion. Refrigerant consumption is not included in total kWh. 3. Scope 1 Emissions Combustion of fuel and operation of facilities – includes Natural Gas, Diesel, LPG, Fugitive Emissions and Fleet Vehicles. 4. Scope 2 Emissions Purchase of electricity by the Group for its own use (the Group does not purchase heat, steam or cooling). Market-based emissions use supplier-based emission factors and energy attribute certificates for where 100% renewable supplier tariffs are not in place. Residual mix factors are excluded due to the entire group electricity consumption being covered by 100% renewable tariffs or energy attribute certificates. 5. Scope 3 emissions are not separately reported by UK and Rest of Group, due to the collection of travel data at the group level. 6. Energy attribute certificates have been purchased to claim renewable electricity consumption for all sites where 100% renewable supplier tariffs are not in place. These certificates have been sourced from an internationally recognised trader who is an IETA member and gold partner of CDP. 65% of our total electricity consumption is via 100% direct renewable supplier tariffs.

London Stock Exchange Group plc 48 Annual Report 31 December 2019 Strategic Report Supporting sustainable growth

Task Force on Climate-related Financial Disclosures (TCFD) Supporting the call for more effective climate-related financial disclosures to inform longer-term investment decision, in June 2017 LSEG signed a statement of support for the recommendations of the TCFD framework established by the Financial Stability Board.

The table below, by cross-referencing relevant disclosures, summarises LSEG’s current TCFD alignment. TCFD recommended disclosures LSEG approach 2019 enhancements References GOVERNANCE a. Information on LSEG’s governance ––LSEG Board has oversight of the Group Corporate ––Board Risk Committee ––Group Corporate around climate-related risks and Sustainability Policy, which includes our presented with clearly identified Responsibility Policy opportunities: Board’s oversight Environmental policy; non-financial risk framework ––LSEG CS Report 2019: ––The Group CEO sponsors the Group CS Policy as part of Group ERM, Environment section, at Board level including climate-related risks page 36 ––The Group CFO reports to the Board on ––Risk section of this report, environmental matters page 73 b. Information on LSEG’s governance ––Group CS Committee chaired by the Group ––LSEG Corporate around climate-related risks and CRO comprise a number of Executive Sustainability report opportunities: Management’s role Committee members 2019, Governance section, ––The EMG is responsible for setting Group-wide page 7 targets, and managing and seeking to improve ––LSEG Annual Report 2019, our environmental performance Supporting Sustainable Growth section, page 40 STRATEGY a. Climate-related risks and ––Impact of low-carbon transition and rise of green ––The Group has developed ––LSEG CS Report 2019: opportunities identified over the industries monitored by FTSE Russell through Green climate-related risk scenarios over Environment section, short, medium and long-term: Revenues data model both the medium and longer page 36–42 term to help identify how these ––FTSE Russell Green risks may impact our business Revenues data model ––Strategy section of this b. Impacts of climate-related risks and ––Our EMG guides the Group’s environmental strategy, ––ESG and climate factors are report, page 15 opportunities on LSEG’s business, and is responsible for setting Group-wide targets, becoming a mainstream ––For scenario analysis, strategy and financial planning managing and seeking to improve our consideration in investment see risk section of this environmental performance decision making report, page 73 c. Resilience of the organization’s ––We have been working on developing scenarios to ––Scenario selection completed ––LSEG Annual Report strategy based on scenario analysis identify the most material physical and transition 2019, Supporting risks for the business Sustainable Growth, page 40 RISK MANAGEMENT a. Information on LSEG’s processes ––Some climate-related risks have been categorised as ––Training was delivered to Risk ––LSEG 2019 CDP for: identifying and assessing emerging risks and it is acknowledged that they are champions to enable effective Response: Risk and climate-related risks inherently linked to other strategic, financial and identification and assessment Opportunities Section, operational risks of ESG risks, including questions C2.1–C2.3 climate-related ––LSEG annual report: ––The Group has developed Principal risks and climate-related risk scenarios uncertainties over both the medium and – emerging risks longer term section, page 73 b. Information on LSEG’s processes ––LSEG has taken proactive steps to develop its ––LSEG Annual Report, for: managing climate-related risks methodology to define and model how climate Supporting Sustainable change impact its businesses. The aim is to reinforce Growth, page 40 the Group’s resilience c. Information on LSEG’s processes ––LSEG continues to increase our focus on embedding for: how climate-related risks are these risks in our ERM framework and some integrated into LSEG ERM system climate-related risks have been categorised as emerging risks and it is acknowledged that they are inherently linked to other strategic, financial and operational risks METRICS AND TARGETS a. Metrics and targets used by ––Exposure of our markets to the green economy ––LSEG CS Report 2019: LSEG to assess and manage: Environment section, relevant climate-related risks pages 36–42 and opportunities ––FTSE Russell Report b. Metrics and targets used by LSEG –– Physical risk metrics are associated with LSEG “Investing in the Global to assess and manage: Scope 1, 2 environmental programme targets Green Economy: and 3 GHG emissions busting common myths”, 30 May 2018 c. Metrics and targets used by LSEG ––LSEG sets environmental targets for business ––LSEG has submitted 2030 ––LSEG Annual Report to assess and manage: Targets operations for 2020 and 2030 and reports against targets to the Science Based 2019, Supporting and performance these targets externally on an annual basis Targets initiative (SBTi) and is Sustainable Growth, still working to obtain approval page 48

London Stock Exchange Group plc Annual Report 31 December 2019 49 Supporting sustainable growth (continued)

Our wider responsibility (continued)

Policies Human Rights A Group-wide Policy Framework has been established with LSEG respects and seeks to adhere to the UN Guiding Principles on each policy containing the following: Business and Human Rights, together with the International Labour Organization Conventions and Recommendations within our ––Risk definition and identification working environment in each location where we operate. The Group ––Risk Appetite and Tolerances strongly supports these conventions which aim to abolish forced labour and child labour and promote freedom of association and ––Minimum Standards and Risk Management Activities equality. Human rights considerations are also included in our Supplier Code of Conduct and Group Corporate Sustainability policy. All Group-level policies are approved by the Executive Committee as a minimum and other Committees and Boards as defined in the Our risk assessment and research in 2019 has once again indicated Enterprise Risk Management Framework. Policies are subject to that LSEG operates in an industry where the risk of modern slavery annual review, which may be approved by the Policy Owner and and human trafficking is inherently low. However, we operate as a Executive Sponsor if there are no material changes. global business and therefore recognise the risks of partnering with a varied spectrum of global suppliers and of slavery occurring deeper Polices are implemented and managed in accordance with the in those complex supply chains. Enterprise Risk Management Framework and three lines of defence operating model. All Group Policies are published on Bond, the The Group has a zero-tolerance approach to modern slavery. internal online intranet site, available to all staff. Material Policy Some of the key actions taken in 2019 were: breaches are reported to the Board, the Executive Committee and relevant sub-Committees. ––Refreshed risk assessment on our current supplier base to identify the highest risk suppliers from a slavery perspective which has Given their relevance for our industry and associated risks, confirmed majority of our relevant supplier spend is with suppliers we provide below a brief comment on the outcomes of the in our lowest slavery risk tier. Our procedures and anti-slavery following policies, deemed to be most relevant to our Corporate approaches continue to be appropriate and proportionate Sustainability processes: ––Following from the 2018 Modern Slavery Act Statement and ––Financial Crime (including Anti-Money Laundering) analysis we obtained agreement to our enhanced Supplier Code ––Anti-bribery and Corruption of Conduct from a number of higher risk suppliers, with the majority of our current relevant supplier base having now ––Group Information Security accepted our Supplier Code of Conduct ––Business Continuity Management ––Having identified a small number of suppliers’ risk to be in our highest tier risk category, we have established an action to ensure In the case of all policies stated above, compliance with which is that such identified suppliers agree to our Supplier Code of regularly monitored, the outcome is that there have been no Conduct in 2020 breaches material to LSEG in 2019. More details on these policies can be found on page 45 of the CS report. The most recent version of our modern slavery statement can be found at: www.lseg.com/about-london-stock-exchange- Our Code of Conduct and Corporate Sustainability policy, both group/corporate-sustainability/modern-slavery-act- published on our website, are underpinned by LSEG’s values and statement behaviours and a number of policies that embed sustainability into our day to day operations.

All new and existing LSEG employees are provided with training on the Group’s core policies, including all the key regulatory and legal requirements. The Group has maintained a 100% completion rate across all compliance training delivered in the 2019 period.

London Stock Exchange Group plc 50 Annual Report 31 December 2019 Strategic Report Board engagement Board engagement with stakeholders with stakeholders

The table below sets out how the Board engages with and seeks to understand the views of our key stakeholders: customers, regulators and the workforce. Not all information is reported directly to the Board and not all engagement takes place directly with the Board. However, the output of this engagement informs business-level decisions, with an overview of developments and relevant feedback being reported to the Board and/or a Board Committee.

Further information on the activities of the Board can be found in the Corporate Governance Report beginning on page 78. How this engagement influenced Board Stakeholder group Form of engagement discussions and decision making

Our customers We believe that aligning our strategy, services and Customer feedback is communicated by the Group CEO, The Group has grown rapidly through growth and products to the needs and interests of our customers Group CFO and other members of the Executive team to acquisition, building businesses around three is central to supporting long-term value creation, the Board through its regular reporting mechanisms strategic areas: Capital Formation, Information enabling innovation in products which can be when decisions are taken which could impact customers. Services and Post Trade and Risk Management rapidly adopted. services. We intend to further develop these When taking the decision to move ahead with the businesses and focus on delivering the opportunities A number of our businesses including LCH, Turquoise proposed acquisition of Refinitiv the Board concluded and efficiencies of operating a unified Group to and MTS are owned and governed in partnership with that the acquisition would not only result in the long-term benefit our customers and drive sustainable our customers which we believe helps us to better success of the Company but further improve customer long-term growth. understand their views and enhances our ability to experience as the combined group will create a global add value to their businesses leader in data analytics, risk, collateral and processing solutions as well as provide access to a breadth of capital We also engage regularly with our customers at raising and trade execution innovations beyond roundtable events, market opens and more recently, listed equities. the introduction of the new market close sessions and conferences. We monitor customer feedback to help us establish our customer’s views on the Group’s products and services as well as the ways that they would like us to improve our offering. In addition, customer engagement meetings are held for our senior management to understand what matters to our customers and build strategic relationships with them.

Our workforce Engagement with our workforce includes formal and There was acknowledgement in these sessions that informal meetings, an annual engagement survey, and there was a lot of work that needed to be done ahead town hall meetings. Directors visit our operations and of completing the proposed acquisition of Refinitiv engage with the workforce. and colleagues made some suggestions about communications to employees. This feedback has been The Board seeks to engage with a wide cross section incorporated into the Group’s internal communications of the workforce to better understand their perspective strategy for 2020. on the business. During 2019 this included: ––Informal dinners with staff in Italy ––Breakfast meetings with staff in the UK and the US More information on workforce engagement can be found on pages 43–46 of the Strategic report and page 80 of the Corporate Governance Report.

Our regulators We engage with regulators on public policy, regulation Feedback from ongoing engagement with UK and and official guidance that may affect the Group’s international regulators on Brexit helped inform the businesses in many countries across the globe. Board’s decision-making on Brexit planning and has positioned the Group well both in its response to and Brexit was a key topic where we had regular planning for the regulatory impacts of Brexit and the engagement with a number of regulators in 2019. opportunities to deliver solutions to help the market We also engaged with key regulators before address the changing regulatory environment, and after the announcement of the proposed including those linked with the departure of the UK acquisition of Refinitiv. from the EU. The Board’s of the LSEG’s regulated businesses have The views of regulators were taken into account in considerable engagement on a number of other planning for the Refinitiv transaction. Closing of the matters, including regulatory change, operational Transaction will be subject to regulatory approval. resilience including cyber preparedness.

Suppliers Our suppliers are also important stakeholders of the Group. During 2019, the Group adopted an enhanced Supplier Code of Conduct with additional on-boarding procedures placing more robust expectations on the Group’s suppliers in the area of modern slavery and human trafficking. We also commenced a transformation of our Group Procurement function to enable more effective management of the Group’s suppliers and this included a review of the Group’s 500 most important supplier contracts. A number of the Group’s subsidiaries are required to report their supplier performance and policies as part of the Small Business, Enterprise and Employment Act 2015. During 2019, further steps were taken to accelerate the payment process and focus was given to ensuring purchase orders are raised and receipted promptly in compliance with the Group’s procurement policy.

More information on the Group’s approach to managing its supply chain found at: www.lseg.com/about-london-stock-exchange-group/corporate-sustainability/ modern-slavery-act-statement

London Stock Exchange Group plc Annual Report 31 December 2019 51 How the Board has complied with Section 172(1)of the Companies Act 2006

Section 172(1) statement 2. All-share acquisition of Refinitiv Section 172 of the Companies Act 2006 requires a Director of a company to act in During 2019, having monitored the development of the financial markets the way he or she considers, in good faith, would most likely promote the success infrastructure sector, the Board considered the proposed all-share acquisition of of the company for the benefit of its members as a whole. In doing this Section Refinitiv, a leading global provider of markets data, analytics and infrastructure. 172 requires a Director to have regard, amongst other matters, to the: Following those discussions, the Board concluded that the proposed transaction supported LSEG’s value creation strategy to create a financial markets ––Likely consequences of any decisions in the long-term infrastructure leader of the future and was the approach which was most likely to deliver the best results for the Company and its stakeholders. In doing so it ––Interests of the company’s employees considered a number of different factors including the impact of the transaction ––Need to foster the company’s business relationships with suppliers, customers on specific stakeholders. For example: and others Customers ––Impact of the company’s operations on the community and environment The Board believes that the transaction will: ––Desirability of the company maintaining a reputation for high standards of ––Transform LSEG’s position as a leading global financial markets business conduct infrastructure group ––Need to act fairly as between members of the company ––Significantly enhance LSEG’s customer proposition in data and analytics In discharging our Section 172 duties we have regard to the factors set out above. We ––Create a global multi-asset capital markets business also have regard to other factors which we consider relevant to the decisions being ––Deepen and expand our shared core principles of customer partnership made. Those factors, for example, include the interests and views of our suppliers and open access and our relationship with regulators and governments. We acknowledge that every decision we make will not necessarily result in a positive outcome for all of our Shareholders stakeholders. By considering the Company’s purpose, vision and values together The Board also believes that the transaction has a compelling financial profile for with its strategic priorities and having a process in place for decision-making, we do, shareholders, resulting in sustainable growth and substantial synergies, with in however, aim to make sure that our decisions are consistent and predictable. excess of £350 million cost and £225 million revenue run rate synergies identified, leaving LSEG well positioned for future growth. For details on how our Board operates and the way in which we reach decisions, including the matters we discussed and debated during the year, the key The LSEG General Meeting held on 26 November 2019 in which the LSEG stakeholder considerations that were central to those discussions and the way shareholders approved the acquisition of Refinitiv in an all-share transaction in which we have had regard to the need to foster the company’s business for a total enterprise value of approximately US$27 billion confirmed that the relationship with customers, suppliers and other stakeholders, please see pages Company’s shareholders had a positive view of the transaction and marked an 78–87 of the Corporate Governance Report, Committee Reports, stakeholder important milestone toward achieving completion. engagement disclosure, other relevant strategic report disclosures and the new disclosure requirements in relation to suppliers, customers and others. Employees The Board also considered the potential impacts on the LSEG workforce of the We set out below some examples of how the Directors have had regard to the cost run rate synergies identified. The Board considered the management matters set out in Section 172(1)(a)-(f) when discharging their Section 172 duty structures which would need to be established to lead the Combined Company. and the effect of that on certain of the decisions taken by them. Through its Remuneration Committee the Board developed a Remuneration Policy which will appropriately reward employees both as a standalone company 1. Annual strategy review and in the event that the transaction completes. The Board carries out a review of the Company’s strategy on an annual basis. This includes approving the business plan for the following three years. In 2019 3. Rejection of Conditional Proposal from HKEX the Board’s strategic review included a review of progress against 2019 strategic During 2019, the Board fully reflected on the unsolicited approach, from HKEX to priorities, LSEG’s long-term strategic goals and presentation of the Divisional acquire the entire share capital of LSEG. As detailed in the LSEG announcement strategy for the Capital Markets, Information Services and Post Trade businesses. published on 13 September 2019, the Board highlighted fundamental concerns During its review the Board also focused on selected Group priorities including: around key aspects of the conditional proposal: strategy, deliverability, form of the Group’s technology strategy, culture, government relations and regulatory consideration and value especially when compared to the significant value strategy and the financial impact of the strategy. The Board also considered expected to be created through the planned acquisition of Refinitiv. integration planning for the proposed acquisition of Refinitiv. As a result and having considered their legal duties as Directors, the Board took In making its decision to approve the business plan and future strategy of the the decision to unanimously reject the conditional proposal and reaffirm its Company, the Board also considered amongst other things, its impact on the commitment to the acquisition of Refinitiv. long-term position of the Company and its reputation as well as feedback from engagement exercises with our workforce and dialogue with customers and regulators.

London Stock Exchange Group plc 52 Annual Report 31 December 2019 Strategic Report Financial review Financial review

Variance at 12 months 12 months organic and ended Dec ended Dec constant 2019 2018 Variance currency2 Revenue £m £m % % Information Services 902 841 7 5 Post Trade Services – LCH 550 487 13 13 Post Trade Services – CC&G and Monte Titoli 103 102 1 2 Capital Markets 426 407 5 5 Technology Services 66 65 2 1 David Warren Other 9 9 – – Group Chief Total revenue 2,056 1,911 8 6 Financial Officer Net Treasury Income through CCP businesses 255 218 17 16 The financial review covers the financial year ended 31 December 2019. Other income 3 6 – – Commentary on performance uses variances on a continuing organic and Total income 2,314 2,135 8 7 constant currency basis, unless otherwise stated. Constant currency is calculated Cost of sales (210) (227) (8) (8) by rebasing 2018 at 2019 foreign exchange rates. Sub-segmentation of revenues Gross profit 2,104 1,908 10 9 are unaudited and are shown to assist the understanding of performance. Operating expenses before depreciation, amortisation 1 Highlights and impairment (839) (834) 1 (1) ––Total income of £2,314 million (2018: £2,135 million) increased by 7% and Income from equity Investments 7 – – – total revenue of £2,056 million (2018: £1,911 million) increased by 6% Share of loss after tax of ––Adjusted EBITDA1 of £1,265 million (2018: £1,066 million) increased by 17% associates (7) (8) (12) (12) Adjusted earnings before 1 ––Adjusted operating profit of £1,065 million (2018: £931 million) increased by 13% interest, tax, depreciation, amortisation and ––Operating profit of £738 million (2018: £751 million) decreased by 3% impairment1 1,265 1,066 19 17 ––Adjusted basic earnings per share1 of 200.3 pence (2018: 173.8 pence) Depreciation, amortisation 1 increased by 15% and impairment (200) (135) 49 49 Adjusted operating profit1 1,065 931 14 13 ––Basic earnings per share of 119.5 pence (2018: 138.3 pence) decreased by 14% Amortisation of purchased ––Total dividend per share of 70.0 pence (2018: 60.4 pence) increased by 16% intangible assets and non-underlying items (327) (180) 81 78 Operating profit 738 751 (2) (3) There were no discontinued operations in 2019. Adjusted basic earnings per share1 200.3p 173.8p 15 1. London Stock Exchange Group uses non-GAAP performance measures as key financial indicators as the Board believes these better reflect the underlying performance of the business. As in Basic earnings per share 119.5p 138.3p (14) previous years, adjusted operating expenses, adjusted EBITDA, adjusted operating profit and adjusted earnings per share all exclude amortisation and impairment of purchased intangible 1. Before amortisation of purchased intangible assets and non-underlying items assets and goodwill and non-underlying items 2. Organic growth is calculated in respect of businesses owned for at least 12 months in either period and excludes Beyond Ratings Note: Variances in all tables are calculated from unrounded numbers

Total Income £ m 120 0 2,314

36 23 2,158 2,135

12 mths FX 2018 at Net Treasury Organic Inorganic1 12 mths to 31 Dec constant Income to 31 Dec 2018 currency 2019

1. Inorganic includes income for businesses held for less than 12 months in either period: Beyond Ratings

London Stock Exchange Group plc Annual Report 31 December 2019 53 Financial review (continued)

Information Services Post Trade Services – LCH Variance at 12 months 12 months Variance at 12 months 12 months organic and ended ended constant ended ended constant Dec 2019 Dec 2018 Variance currency Dec 2019 Dec 2018 Variance currency1 Revenue £m £m % % Revenue £m £m % % OTC 307 268 15 13 Index - Subscription 418 373 12 8 Non-OTC 140 136 3 4 Index - Asset Based 231 219 6 2 Other 103 83 25 24 FTSE Russell2 649 592 10 6 Total revenue 550 487 13 13 Real Time Data 97 94 3 3 Net Treasury Income 206 175 18 17 Other Information Services1,2 156 155 1 (1) Total revenue 902 841 7 5 Total income 756 662 14 14 Cost of sales (74) (70) 5 2 Cost of sales (114) (123) (8) (7) Gross profit 828 771 7 5 Gross profit 642 539 19 18 Operating expenses before Income from equity investments 7 – – – depreciation, amortisation Operating expenses before and impairment3 (323) (302) 7 – depreciation, amortisation Earnings before interest, tax, and impairment1 (234) (235) – – depreciation, amortisation Earnings before interest, tax, and impairment3 505 469 7 – depreciation, amortisation Depreciation, amortisation and impairment1 415 304 36 – and impairment3 (56) (29) 93 – Depreciation, amortisation Operating profit3 449 440 2 – and impairment1 (76) (62) 23 – 1. Organic growth is calculated in respect of businesses owned for at least 12 months in either Operating profit1 339 242 40 – period and so excludes Beyond Ratings 1. Operating expenses before depreciation, amortisation and impairment; earnings before interest, 2. Mergent and some other minor items (previously reported in FTSE Russell subscriptions) are now tax, depreciation, amortisation and impairment; depreciation, amortisation and impairment; and included in Other Information Services for both periods operating profit variance percentage is shown on a reported basis only i.e. not on a constant 3. Operating expenses before depreciation, amortisation and impairment; earnings before interest, currency basis. Variances will include underlying movements and foreign exchange effects tax, depreciation, amortisation and impairment; depreciation, amortisation and impairment; and operating profit variance percentage is shown on a reported basis only i.e. not on a constant Post Trade Services – LCH comprises the Group’s majority owned global clearing currency basis. Variances will include underlying movements and foreign exchange effects business. Total income was £756 million (2018: £662 million). Information Services provides global index products, real time pricing data, product identification, reporting and reconciliation services. Revenue was 2019 performance is in line with the Group’s double-digit growth revenue target £902 million (2018: £841 million). for OTC clearing. OTC clearing revenue increased by 13% to £307 million (2018: £268 million), driven by SwapClear, with strong growth in client clearing where FTSE Russell’s revenue was £649 million (2018: £592 million). On a reported basis, client trade volume increased by 13% to 1,681,000 (2018: 1,487,000). ForexClear revenue increased by 10% and growth on a constant currency basis was 6% membership increased to 34 members (2018: 32) while notional value cleared driven by strong subscription renewal rates and data sales, as well as increases grew by 5% to US$18.0 trillion (2018: US$17.2 trillion). Of this, $61 billion was in average AUM levels in benchmarked ETFs and other investable products. client cleared notional, up significantly from the previous year (2018: $8 billion).

Real Time Data revenue increased by 3% to £97 million (2018: £94 million) driven Non-OTC clearing revenue increased by 4% to £140 million (2018: £136 million), by increased licence sales, partially offset by the revenue impact of a 4% decline reflecting continued strong performance in RepoClear. RepoClear reached a in the number of terminals to 167,000 (2018: 174,000). record nominal value cleared of €106 trillion (2018: €98.7 trillion) up 7% largely as a result of strong growth in the underlying Repo market, particularly in Europe Other Information Services revenue is broadly in line with last year at as a result of excess liquidity with members realising netting and other benefits £156 million (2018: £155 million), with recurring licence growth in data from the newly consolidated Euro debt pool in LCH SA. products offset by a decline in transactional revenues in UnaVista. Other revenue, which includes fees from non-cash collateral management, Cost of sales increased by 2% to £74 million (2018: £70 million), primarily as a compression services, recharged pass through costs and revenue sharing result of increased data charges and partnership costs, in relation to growth in agreements, increased by 24% to £103 million (2018: £83 million). FTSE Russell revenue. Net Treasury Income increased by 17% to £206 million (2018: £175 million). Reported operating expenses excluding depreciation, amortisation and The growth reflects a 13% rise in average cash collateral held to €98.4 billion impairment (D&A) increased by 7% to £323 million (2018: £302 million), and (2018: €86.7 billion), primarily driven by volumes cleared and market volatility. D&A rose 93% to £56 million (2018: £29 million) reflecting continued investment Increased capacity with investment counterparties as well as continued to support growth of the business and share of IFRS 16 right of use asset expansion of the range of products invested in for asset allocation optimisation amortisation. The increase in total cost contributed to a marginal operating profit continued to support NTI growth. The Group expects NTI to stabilise around the margin decline. levels seen in H2 2019 if collateral levels remain unchanged.

Reported operating profit increased by 2% to £449 million (2018: £440 million). Cost of sales decreased 7% to £114 million (2018: £123 million), reflecting the The Group remains on track to achieve the financial performance announced as updated SwapClear agreement which came into effect at the start of the year, part of the Yield Book acquisition. which exceeded the £30 million benefit previously communicated.

London Stock Exchange Group plc 54 Annual Report 31 December 2019 Strategic Report Financial review

Reported operating expenses excluding D&A remained flat and D&A increased by Capital Markets 23% to £76 million (2018: £62 million), driven by investment to support growth 12 months 12 months Variance at and IFRS 16 right of use asset amortisation. ended ended constant Dec 2019 Dec 2018 Variance currency Revenue £m £m % % LCH EBITDA margin increased by nine percentage points to 55% (2018: 46%), Primary Markets 151 113 34 34 significantly exceeding the target of approaching 50% by 2019. Secondary Markets – Equities 151 169 (11) (11) Reported operating profit increased by 40% to £339 million (2018: £242 million). Secondary Markets – Fixed Income, Derivatives and Other 124 125 – 1 Total revenue 426 407 5 5 Post Trade Services – CC&G and Monte Titoli Cost of sales (5) (16) (67) (67) 12 months 12 months Variance at ended ended constant Gross profit 421 391 8 8 Dec 2019 Dec 2018 Variance currency Operating expenses before Revenue £m £m % % depreciation, amortisation and Clearing (CC&G) 43 41 3 4 impairment1 (192) (189) 2 – Settlement, Custody and Share of loss after tax of Other (MT) 60 61 – 1 associates (1) (1) – – Inter-segmental revenue – 1 – – Earnings before interest, tax, Total revenue 103 103 1 2 depreciation, amortisation and impairment1 228 201 13 – Net Treasury Income (CC&G) 49 43 14 15 Depreciation, amortisation Total income 152 146 5 6 and impairment1 (32) (17) 88 – Cost of sales (7) (7) – – Operating profit1 196 184 7 – Gross profit 145 139 5 6 1. Operating expenses before depreciation, amortisation and impairment; earnings before interest, Operating expenses before tax, depreciation, amortisation and impairment; depreciation, amortisation and impairment; and operating profit variance percentage is shown on a reported basis only i.e. not on a constant depreciation, amortisation and currency basis. Variances will include underlying movements and foreign exchange effects impairment1 (44) (47) (6) – Earnings before interest, tax, Capital Markets comprises Primary and Secondary Market activities. Revenue depreciation, amortisation was £426 million (2018: £407 million). and impairment1 101 92 10 – Depreciation, amortisation and impairment1 (9) (9) – – Primary Markets revenue increased by 34% to £151 million in 2019 (2018: £113 million) with underlying revenue remaining stable despite uncertainty due to Operating profit1 92 83 11 – Brexit delays and the UK general election. The Group benefited from a change in 1. Operating expenses before depreciation, amortisation and impairment; earnings before interest, tax, depreciation, amortisation and impairment; depreciation, amortisation and impairment; and estimate relating to IFRS 15 due to a reduction in the length of time initial operating profit variance percentage is shown on a reported basis only i.e. not on a constant admissions and further issue revenues are required to be recognised, which currency basis. Variances will include underlying movements and foreign exchange effects resulted in a £32 million one-off balance sheet release. The total amount of Post Trade Services provides clearing (CC&G), settlement and custody activities capital raised across the Group’s markets, through both new and further issues, (both Monte Titoli). Total income was £152 million (2018: £146 million). decreased by 18% to £23.4 billion (2018: £28.7 billion), however four new admissions each raised over £1 billion (2018: one admission over £1 billion). CC&G clearing revenues increased by 4% to £43 million (2018: £41 million) Although there was a 38% decrease in the number of new issues across the mainly due to growth in bonds clearing volumes, mirroring trading performance Group’s markets to 109 (2018: 176), the average market capitalisation of on MTS Repo market, jointly with higher guarantee deposit fees and fails companies joining the Group’s UK markets increased by 50% to £849 million commissions. Underlying Monte Titoli revenues were flat year on year as a result (2018: £565 million). Further issuance from investment funds accounted for £4.2 of higher custody revenues, largely due to the rise in assets under custody, offset billion (2018: £2.6 billion) with 55% of prior year listings raising further capital in by lower settlement revenues recorded in the year following a decrease in 2019 (2018: 21%) following the trend that funds are able to upscale expediently settlement instructions. on the Group’s markets to advance their strategies after listing.

CC&G generates Net Treasury Income by investing the cash margin held, Secondary Markets revenue decreased by 11% to £151 million (2018: £169 retaining any surplus after members are paid a return on their cash collateral million). UK average order book daily value traded fell by 19% to £4.7 billion contributions. Net Treasury Income increased by 15% to £49 million (2018: £43 (2018: £5.8 billion) in line with the subdued volume trend impacting European million) as result of higher average daily initial margin at €14.4 billion, 31% higher equity markets in 2019. Following on the same trend, Italian equity trading than 2018 (2018: €11.0 billion). volumes also decreased by 10% year on year, with 255,000 trades per day (2018: 282,000). Turquoise, the Group’s pan-European equities platform, was Cost of sales was in line with 2018. similarly impacted with a 36% reduction in average daily equity value traded to €2.1 billion (2018: €3.2 billion). Lower market volumes on Turquoise Lit Book Reported operating expenses excluding D&A decreased by 6% to £44 million were partly offset by Turquoise Plato and Turquoise Plato Lit Auctions which (2018: £47 million), driven by lower IT costs from efficiency and lower staff costs. had record years, up 3% and 9% respectively on 2018 performance. D&A was flat year on year.

Reported operating profit increased by 11% to £92 million (2018: £83 million).

London Stock Exchange Group plc Annual Report 31 December 2019 55 Financial review (continued)

Fixed Income, Derivatives and Other revenue remained broadly flat year on Operating Expenses year at £124 million (2018: £125 million). MTS Fixed Income revenue saw a 4% Group operating expenses (including D&A) before amortisation of increase with strong performance by Repo up 24% partially offset by a decline purchased intangible assets and non-underlying items, were £1,039 million of Cash and BondVision down 6% and 3% respectively. Derivatives performance (2018: £969 million). was down 16% driven by the removal of Equity derivatives in the UK during the year and lower volumes on the Italian IDEM market. Growth in ELITE continued, Operating Expenses with increased membership revenue in both the UK and Italy. £ m Cost of sales decreased by 67% to £5 million (2018: £16 million), primarily driven 61 1 1,039 by Turquoise commercial policy changes from rebate model to discount scheme. 969 8 977

Reported operating expenses excluding D&A increased by 2% to £192 million (2018: £189 million) while D&A increased 88% to £32 million (2018: £17 million), reflecting ongoing investment and IFRS 16 right of use asset amortisation.

Share of loss after tax of associates relates to the Group’s share of the HUB Exchange funding platform.

12 mths FX 2018 at Net Underlying Inorganic1 12 mths Reported operating profit increased by 7% to £196 million (2018: £184 million). to 31 Dec constant to 31 Dec 2018 currency 2019 Technology Services 1. Inorganic includes costs for businesses held for less than 12 months in either period: Beyond Ratings 12 months 12 months Variance at ended Dec ended Dec constant Reported operating expenses increased by 7% (6% on an organic and constant 2019 2018 Variance currency £m £m % % currency basis). Within this, reported expenses excluding D&A were well Revenue 66 65 2 1 controlled, with a 1% increase driven by salary and IT costs as the Group Inter-segmental revenue 17 21 (19) (19) continues to invest in new products and resilient infrastructure. Total revenue 83 86 (3) (3) D&A increased by 49%. Within this increase was a £26 million amortisation Cost of sales (7) (9) (23) (23) charge relating to implementation of IFRS 16, which requires items categorised Gross profit 76 77 (1) (1) as finance leases to be recognised on the balance sheet as an asset and the right Operating expenses before to use the asset amortised. Reflecting the 2019 capital expenditure of £195 million depreciation, amortisation and impairment1 (20) (59) 66 – and ongoing investment, underlying D&A in 2020 is expected to increase by a Earnings before interest, tax, similar amount as in 2019. depreciation, amortisation and impairment1 56 18 211 – Inorganic expenses increased by £1 million due to the acquisition of Beyond Depreciation, amortisation and Ratings, which supports product expansion in FTSE Russell ESG indices. impairment1 (25) (20) 25 – Operating profit/(loss)1 31 (2) – – The Group continues to integrate Yield Book and continues with the global 1. Operating expenses before depreciation, amortisation and impairment; earnings before interest, headcount programme announced in March 2019, delivering a benefit of tax, depreciation, amortisation and impairment; depreciation, amortisation and impairment; and £17 million in 2019. The Group expects to achieve the announced run rate operating profit / (loss) variance percentage is shown on a reported basis only i.e. not on a constant currency basis. Variances will include underlying movements and foreign exchange effects savings of £30 million by the end of 2020.

Technology Services provides server location solutions, client connectivity and Income from Equity Investments and Share of Loss After Tax of Associates software products for the Group and third parties. Income from equity investments of £7 million reflects the dividend from the Group’s 4.92% share in Euroclear. As the acquisition was in January 2019 there is Third party revenue increased by 1% to £66 million (2018: £65 million), no prior year comparative. driven by an expanding product suite and higher sales volumes. The share of loss after tax of associates primarily reflects the Group’s 44.1% minority Reported operating expenses excluding D&A decreased by 66% to £20 million share of the operating loss of CurveGlobal of £6 million (2018: £7 million share of (2018: £59 million), and D&A increased 25% to £25 million (2018: £20 million), loss). CurveGlobal volumes continued to grow and open interest at the end of driven by continued Group technology investment. 2019 was up 14%, to 395,000 contracts (2018: 348,000 contracts). The Group recognised a £1 million share of loss on the Group’s investment in the HUB The Technology segment made a profit of £31 million (2018: £2 million loss). Exchange funding platform (2018: £1 million share of loss).

London Stock Exchange Group plc 56 Annual Report 31 December 2019 Strategic Report Financial review

Non-underlying Items Cash Flow and Balance Sheet Non-underlying operating items increased by £147 million to £327 million The Group’s business continued to be strongly cash generative during the year, (2018: £180 million). Non-underlying items in 2019 included amortisation and with cash generated from operations of £1,089 million (2018: £969 million). impairment of goodwill and purchased intangible assets of £195 million (2018: £159 million). Within this, £25 million relates to accelerated amortisation At 31 December 2019, the Group had net assets of £3,801 million (2018: £3,698 in relation to Mergent Inc; £15 million relates to impairment of goodwill and million). The central counterparty clearing business assets and liabilities within purchased intangibles, Turquoise Global Holdings Ltd £9 million, driven by LCH and CC&G largely offset each other but are shown gross on the balance sheet uncertainty of future cash flows; and Mergent Inc £6 million, driven by lower as the amounts receivable and payable are with different counterparties. expected future cash flows than forecast at the time of acquisition. Net debt The Group incurred restructuring costs of £32 million (2018: nil) in relation 2019 2018 to implementation of the headcount programme announced in March 2019. Year ended 31 December £m £m Integration costs of £4 million (2018: £12 million) relate to integration Gross borrowings 2,085 2,203 of Yield Book. Cash and cash equivalents (1,493) (1,510) Net derivative financial liabilities 38 47 In relation to acquisitions, the Group has incurred £96 million (2018: £9 million) Net debt 630 740 of transaction costs. Regulatory and operational cash 1,125 1,120 Operating net debt 1,755 1,860 The Group incurred £16 million (2018: nil) of non-underlying financing fees for establishing a bridge financing facility in two tranches of $9.325 billion and At 31 December 2019, the Group had operating net debt of £1,755 million after €3.58 billion (Bridge Facility) in relation to the Refinitiv acquisition. setting aside £1,125 million of cash and cash equivalents held to support regulatory and operational requirements, including cash and cash equivalents Finance Income and Expense and Taxation at LCH Group and amounts covering regulatory requirements at other LSEG Net finance costs were £71 million, up £5 million on the prior year driven by companies. There was little movement in total capital amounts during the year £4 million of lease interest recognised as a result of IFRS 16. In October 2019, and the Group’s operating net debt decreased as cash generated, after organic upon its maturity, the Group repaid a £250 million bond with a coupon of 9.125% and inorganic investments and other normal course payment obligations, was per annum, drawing down on existing facilities to refinance at significantly lower applied to pay down borrowings. rates of interest. In August 2019, the Group arranged a Bridge Facility in connection with its The effective tax rate for the period in respect of continuing underlying proposed acquisition of Refinitiv. The Bridge Facility offers the Group greater operations and excluding the effect of prior year adjustments was 23.7% certainty of availability of funds, to potentially refinance the debt it takes on at (2018: 21.6%). completion as a result of the acquisition. The Bridge Facility has been arranged on terms appropriate for an investment grade borrower and is available in two This reflects the Group’s mix of profits across a largely stable tax base without tranches, one of $9.325 billion and one of €3.580 billion. As at 31 December 2019, any material changes in underlying rates but does include several one-off items the Bridge Facility was undrawn. increasing the rate. These items include the write off of Turquoise Global Holding Ltd’s deferred tax assets, London Stock Exchange Plc’s pension asset being In addition to the Bridge Facility, the Group retained total committed bank subjected to a temporary higher rate of tax, increased exposure to US state taxes facilities for general corporate purposes of £1.2 billion during the financial year. and a one off increase in US federal tax arising from changes in the US legislation. The maturity of the five-year £600 million facility arranged in December 2017 Excluding one-off items the underlying effective tax rate was 22%. was extended during the period for a further year to December 2024. The Group therefore continues to be well positioned to fund future growth. While the UK corporation tax rate was due to fall to 17% from 1 April 2020 it was Strong cash generation, £678 million of undrawn committed bank lines (after made clear during the 2019 general election that the Conservative party intends taking into account committed, swingline backstop coverage for the €300 to amend this and hold the UK Corporation Tax rate at 19%. With regards to the million euro commercial paper in issuance) and the Bridge Facility, continued Group’s UK deferred tax assets and liabilities, these are measured on to provide an appropriate level of financial flexibility to the Group in its substantially enacted future rates at the balance sheet date, which remains at planning at the end of 2019. 17% with the next UK budget scheduled for 11 March 2020.

From a sustainability perspective, we do not expect there to be any material changes to both the underlying tax base and tax rates (assuming the UK remains at 19%). If the mix of profits remains constant with 2019 and each sub group achieves a tax rate close to the local statutory rate the Group should expect to record a reported tax rate of between 22% to 23% for 2020.

London Stock Exchange Group plc Annual Report 31 December 2019 57 Financial review (continued)

Debt maturity proﬁle Foreign exchange £ m 1,026 2019 2018 149 Spot £/€ rate at 31 December 1.17 1.11 Spot £/US$ rate at 31 December 1.31 1.27 Average £/€ rate for the year 1.14 1.13 600 485 451 Average £/US$ rate for the year 1.28 1.34 424 424 299 256 The Group’s principal foreign exchange exposure arises as a result of translating its foreign currency earnings, assets and liabilities into LSEG’s reporting currency 426 of Sterling. For the 12 months to 31 December 2019, the main exposures for the 115 42 Group were its European based Euro reporting businesses and its US based 2021 2022 2023 2024 2025 2026 2027 2028 2029 2020 operations, principally Russell Indexes, Mergent and The Yield Book. A 10 euro Undrawn – Revolving credit facilities Bonds cent movement in the average £/€ rate for the year and a 10 cent movement in Drawn – Commercial Paper Drawn – Revolving credit facilities the average £/US$ rate for the year would have changed the Group’s operating Graph excludes multi-currency Bridge Facility profit for the year before amortisation of purchased intangible assets and non-underlying items by approximately £29 million and £34 million, respectively. The Group’s interest cover, the coverage of net finance expense by EBITDA (consolidated earnings before net finance charges, taxation, impairment, The Group continues to manage its translation risk exposure by, where possible, depreciation and amortisation, foreign exchange gains or losses and non- matching the currency of its debt to the currency of its earnings, to ensure its underlying items), decreased to 14.4 times in the 12 months to 31 December key financial ratios are protected from material foreign exchange rate volatility. 2019 (31 December 2018: 16.1 times) due to the additional costs of the Bridge Facility. Net leverage (operating net debt to EBITDA updated to account for the Earnings per share EBITDA of acquisitions or disposals undertaken in the period) decreased to 1.4 The Group delivered a 15% increase in adjusted basic earnings per share, which times at 31 December 2019 (31 December 2018: 1.8 times) and returns the excludes amortisation of purchased intangible assets and non-underlying items, Group to the middle of its targeted range of 1-2 times. to 200.3 pence (2018: 173.8 pence). Basic earnings per share were 119.5 pence (2018: 138.3 pence). At the end of 2019, the Group’s long-term credit ratings were A3 and A with Moody’s and S&P respectively, with both agencies having moved their ratings Dividend to a negative outlook in anticipation of the impact of the Refinitiv acquisition on The Board is proposing a final dividend of 49.9 pence per share, which together net leverage. Both agencies are positive about the strategic rationale for the with the interim dividend of 20.1 pence per share paid to shareholders in transaction and note the Group’s clearly positioned de-leveraging plans. Prior to September 2019, results in a 16% increase in the total dividend to 70.0 pence per the announcement of the Refinitiv acquisition on 1 August 2019, S&P had share. The final dividend will be paid on 27 May 2020 to shareholders on the upgraded LSEG by one notch to the current A rating and Moody’s had applied a register as at 1 May 2020. positive outlook to its A3, reflecting their views on the Group’s continued progress as it diversifies and strengthens its businesses and resulting earnings.

London Stock Exchange Group plc 58 Annual Report 31 December 2019 Strategic Report Financial review

Financial Targets At an Investor Update event in June 2017, the Group set out financial targets for 2017-2019, with the 2019 outcome provided below. Financial Targets to 2019 Performance FTSE Double-digit growth to continue 2017-2019 2019: Up 10% on a reported basis; Russell up 6% on a constant currency basis LCH Double-digit OTC revenue growth to continue 2019: Up 15% on a reported basis; up 13% on a constant currency basis Adjusted EBITDA margin growth – 2019: 55% approaching 50% by 2019

Targets relating to increases in operating expenses and Group EBITDA margin of c55% were stepped away from at the end of 2018. The Group achieved an EBITDA margin of 54.7% in 2019.

Capital Management Framework The Group has reviewed its Capital Management Framework, which remains broadly unchanged (shown below). The Group continues to focus on maintaining a prudent balance sheet while also continuing to deploy capital for select organic and inorganic investments. Returns to shareholders, including share buy-backs, will continue to be kept under review. Prudent Balance Sheet management ––Flexibility to operate within this range for normal investment / Maintain existing leverage target of 1.0-2.0x Net Debt / EBITDA development and to go above this range in the short term for compelling strategic opportunities ––Manage credit rating, debt profile, and regulatory requirements Investment for growth ––Selective inorganic investment opportunities - meeting high Preserve flexibility to pursue growth both organically and internal hurdles through ‘bolt-on’/strategic M&A ––Continued organic investments Ordinary dividend policy ––Progressive dividend - reflects confidence in strong future Progressive ordinary dividend policy financial position ––Operating in target 2.5-3.0x dividend cover range ––Interim dividend payment of 1/3 of prior full year dividend results Other capital returns ––Continue to keep other returns under review

London Stock Exchange Group plc Annual Report 31 December 2019 59 Principal risks and uncertainties

The management of risk is fundamental to the successful execution of our strategy and to FURTHER DETAIL the resilience of our operations. During 2019, the Group successfully adapted its systems, Our strategic risk objectives, current risk focus, a processes and controls, in preparation for regulatory changes and to address Brexit narrative description of our risk appetite, how LSEG’s risk contingency plans. The Group continues to support its key markets and deliver stable and management framework operates, as well as an resilient services that meet our customers’ needs. overview of the CCPs risk management and operations, are well established and are not described here As LSEG’s risk culture, objectives, appetite, governance and operations are well established, these descriptions naturally do not significantly change from year to year. We have also included Detailed information can be found in our risk a category of emerging risks which are new to the Group or which are difficult to quantify due management oversight supplement. Please visit: to their remote or evolving nature. In most cases, the mitigation for such risks is to establish www.lseg.com/about-london-stock-exchange- appropriate contingency plans and monitor the development of the risk until it can be group/risk-management-oversight quantified and removed or included as a principal risk.

LSEG Risk Governance

OVERVIEW OF PRINCIPAL RISKS:

Strategic Risks Financial Risks Operational Risks Emerging Risks

Global economy Credit risk Technology Climate-related risk Regulatory change Market risk Physical threats Emerging technology Refinitiv Transaction Liquidity risk Model risk Competition Capital risk Security threats – Cyber Transformation Change management Reputation/Brand/IP Settlement and custodial risks Compliance risks Data governance Employees and culture KEY: Risk Level Increasing Risk Level Static Risk Level Decreasing Emerging Risks

London Stock Exchange Group plc 60 Annual Report 31 December 2019 Strategic Report Principal risks and uncertainties

STRATEGIC RISKS Risks related to our strategy (including the implementation of strategic initiatives and external threats to the achievement of our strategy). The category also includes risks associated with reputation or brand values.

RISK DESCRIPTION MITIGATION RISK LEVEL Global economy The footprint of the Group continues to broaden, further improving (Executive Lead: Chief Executive Officer, Executive Committee) the geographical diversification of the Group’s income streams which mitigates the risks of a localised economic downturn. As a diversified markets infrastructure business, we operate in a broad range of Furthermore, income streams across the business divisions of the equity, fixed income and derivative markets servicing clients who increasingly seek Group comprise annuity and fee based recurring revenues to global products and solutions. If the global economy underperforms, lower activity balance against more cyclical and market driven activity. This in our markets may lead to lower revenue. diversification will be significantly enhanced (including enjoying Weaker economic data and low levels of inflation have dominated central bank an increasing proportion of recurring revenues) if the Group official rate actions. The Federal Open Market Committee (FOMC) concerned about a completes the acquisition of Refinitiv, expected during H2 2020. slowing US economy, decreased the Fed Funds target rate three times during 2019. The Group performs regular analysis to monitor the markets space Meanwhile the European Central Bank (ECB) has left rates unchanged at zero and has and the potential impacts of market price and volume movements restarted its quantitative easing programme. on the business. Activities include Key Risk Indicator tracking, Ongoing geopolitical tensions continue to add uncertainty in the markets and may stress testing, and hedging. We continue to actively monitor the impact investor confidence and activity levels. In particular, the political uncertainty ongoing developments following the UK’s exit from the EU. in the UK following its exit from the EU, tensions between the US and its major Committees have been established to assess and address areas trading partners and other countries as well as tensions in Hong Kong and in China, of impact on our operations and the Group has formulated continue to affect global markets. contingency plans with the objectives of continuity of market function and customer service in the event of a divergence of The emergence toward the end of 2019 of the Novel Coronavirus outbreak in China regulation if no trade agreement is achieved. could have a significant impact on the global economy. In a prolonged outbreak situation, the imposition of travel restrictions, border controls and quarantine The Financial Risk Committee closely monitors and analyses protocols could contribute to a major pause in industrial productivity across the Asia multiple market stress scenarios and action plans in order to Pacific region and could suppress demand for commodities, impact the supply chain minimise any impacts stemming from a potential deterioration for many industries globally and the international retail market which in turn could of the macroeconomic environment. The stress scenarios are significantly impact the global financial markets regularly reviewed and updated in response to changes in macroeconomic conditions. The UK exit from the EU leaves significant uncertainty concerning the political and regulatory environment, the UK’s future relationship with the EU and other trading LSEG monitors the potential impact of macroeconomic and partners, and the overall impact on the UK and EU economies both in the short and political events on our operating environment and business model medium term. and the Group is an active participant in international and domestic regulatory debates. These could have adverse impacts on the Group’s businesses, operations, financial condition and cash flows. For more information, see Market trends and our response on pages 14–20, and Note 3 to the accounts, Financial Risk Management on pages 158–163.

London Stock Exchange Group plc Annual Report 31 December 2019 61 Principal risks and uncertainties (continued)

RISK DESCRIPTION MITIGATION RISK LEVEL Regulatory change and compliance Changes in the regulatory environment form a key input into (Executive Lead: Chief Executive Officer, Executive Committee) our strategic planning, including the political impact on our growth strategies, both organic and inorganic. We monitor LSEG is a global business operating in multiple regulatory environments that reflect regulatory developments continually and engage directly with the diversity of products and the jurisdictions in which it operates. The Group is regulatory and governmental authorities at local, regional and exposed to risks associated with the management of changes to these regulatory national levels. requirements. Key regulatory changes include: The Group also has a structured Brexit programme which includes Brexit – LSEG companies conducting regulated activities in the EU or with customers regulatory specialists engaging at appropriate levels and on in the EU are subject to EU regulation. The Group has implemented contingency plans financial market infrastructure considerations. Risks are actively to maintain continuity of service to customers and orderly functioning of its markets, monitored and managed - see Emerging Risks. including incorporation of new entities in the EU27 and securing authorisation within the EU27 for certain Group businesses. The Group continues to engage with regulators The Group has executed the following contingency plans for its and parties in the UK, EU and other jurisdictions to advise on financial market business. Following the European Commission implementing infrastructure considerations such as the potential impacts of divergence. decision for UK CCPs on 19 December 2018, it was announced on 18 February 2019 that LCH Ltd has been recognised by ESMA as a Regulation impacting CCPs – Regulatory initiatives with the potential to impact third country CCP under Article 25 of EMIR. On 23 December 2019 cleared derivatives markets and CCPs continue through international standard setters the European Commission extended this equivalence decision for and regulators in the EU and US and other major jurisdictions. Our primary focus another 12 months in case of a no-deal Brexit. This recognition remains on development of a coherent, cross-border regulatory framework for market confirms LCH Ltd’s ability to continue to offer all clearing services access to global CCPs, including appropriate access rules under the EMIR review for all products and services to all members and clients if there published in December 2019. As part of this review, EMIR 2.2 introduces the option to were to be a no-deal Brexit scenario post 31 January 2020. LCH impose enhanced supervision or deny the recognition of third country CCPs that are reserves its right to take any action it considers appropriate at any of systemic importance for the EU, which could have implications for the Group’s CCPs time, should there be a material change in circumstances. In as well as comparable compliance frameworks for jurisdictions of equivalent addition, LCH SA and CC&G are allowed under the Bank of England regulatory frameworks. Proper calibration of EU rules on CCP Recovery and Resolution Temporary Recognition Regime (TRR) to provide clearing services and harmonisation with other key jurisdictions is also a key priority and could likely and activities in the UK for up to three years in a ‘no deal’ scenario. have an impact on the Group’s CCPs. The European CCP Recovery and Resolution framework is expected to be finalised in 2020 – it could impose additional resources LSEG’s key objectives to provide continuity of stable financial for CCPs. infrastructure services as part of our global remit. As the various regulatory initiatives progress, there will be greater certainty with MiFID II/MiFIR – The Regulation and the Directive came into force on 3 January regard to their likely final form. The Group continues to focus on 2018, however the European Commission and ESMA commenced a targeted review remaining well positioned to respond to regulatory developments process in the second half of 2019 with potential impacts on the Group, particularly in and further opportunities exist for the Group to deliver solutions to the areas of trading transparency (e.g. double volume cap) and market data (fees help the market address the changing regulatory environment transparency and potential introduction of consolidated tape). The third country including those linked with the departure of the UK from the EU. access rules for trading venues and market participants continued to be evaluated in 2019 and could also have a potential impact to access our trading venues in the UK and EU, in particular the scope of the Share Trading Obligation. Prudential Capital Rules – In June 2019, the Basel Committee on Banking Supervision (BCBS) published final recommendations on the Basel III Framework, which as currently drafted could adversely impact the cleared derivatives industry. One area of primary importance is the treatment of customer margin under the leverage ratio. BCBS has announced a targeted revision of the leverage ratio to allow initial margin and variation margin received from a client to offset the replacement cost and potential future exposure for client cleared derivatives. This is a positive development for market participants and therefore the Group. The EU regulatory framework already recognised this offsetting via the Capital Requirements Regulation adopted in May 2019. In 2019, the review of the prudential regime for investment firms was finalised. The implementation of the Regulation and the Directive will take place in 2020 and we will monitor its impact on proprietary trading firms and their continued ability to provide liquidity on LSEG markets.

London Stock Exchange Group plc 62 Annual Report 31 December 2019 Strategic Report Principal risks and uncertainties

RISK DESCRIPTION MITIGATION RISK LEVEL Regulatory change and compliance (continued) Benchmark Regulation – Regulatory focus on the role of benchmarks in the market and regulation of benchmark providers continues to increase in several major jurisdictions around the world. FTSE International Limited was authorised by the UK’s Financial Conduct Authority (FCA) in 2018 as a Benchmark Administrator, under the European Benchmark Regulation. In March 2019 political agreement was reached for sustainable finance legislative proposals and the ESA Review, which could impact benchmarks. In October 2019, the Commission consulted on a potential EU BMR Review. Financial Transactions Tax (FTT) – A sub-set of EU member states are discussing, under enhanced cooperation, a possible FTT, which could adversely impact volumes in financial markets. During 2019 little progress was made, but efforts continue to finalise the measure. Information and cyber security standards – In many of our key regulatory jurisdictions, there is an increasing legislative and regulatory focus on cyber security and data protection which could impact our operations and compliance models. LSEG supports the regulatory efforts on these issues, as they increase the standards for customers, vendors and other third parties with whom we interact. We continue to support regional and global efforts to harmonise these standards globally to avoid conflicting or duplicative requirements for financial market infrastructure providers operating in several jurisdictions and our market participants For more information on regulatory changes, see Market trends and our response on pages 14–20. Refinitiv Transaction An Integration Management Office for the Transaction (the IMO) New (Executive Lead: Chief Executive Officer, Executive Committee, Group Board) has been established, headed by David Shalders, Chief Integration Officer and Group COO. The IMO is responsible for On 1 August 2019, LSEG announced that it had agreed definitive terms with a managing the overall integration planning process and will be consortium including certain investment funds affiliated with Blackstone, as well as responsible for ensuring that the synergies expected to result Thomson Reuters (together, the Refinitiv Shareholders) to acquire Refinitiv in an all from the Transaction are properly monitored, reported on and share transaction (the Transaction). delivered. The IMO comprises senior leaders from both LSEG and Completion of the Transaction is subject to a number of conditions (including merger Refinitiv and will build upon the strong working relationship control clearances and regulatory approvals) which may not be satisfied or waived, already established between the two organisations. LSEG has or which may not be capable of satisfaction without the imposition of undertakings, also engaged a leading global external consulting firm, which is conditions or divestments, which could be material. If merger clearances are not a specialist in planning and delivering large-scale and complex obtained or there is material delay in reaching agreement on remedies to facilitate business integration projects for global institutions, to support the Transaction, LSEG will in certain circumstances pay a termination fee of £198.3 the integration. million to the Refinitiv Shareholders. The integration will be managed in two phases, integration Delay in completing the Transaction will prolong the period of uncertainty for LSEG, planning (prior to Completion) and integration implementation and both delay and failure to complete may result in the accrual of additional and, in (following Completion). Each phase will be overseen by an the case of a failure to complete, wasted costs, without any of the potential benefits integration committee of senior executives, led by of the Transaction having been achieved. Further, LSEG’s management would have David Schwimmer, with representation from LSEG, Refinitiv and spent time in connection with the Transaction that could otherwise have been spent the Refinitiv Shareholders, and will report to the Board on a more productively in connection with other activities of LSEG. regular basis. In addition, the success of the Transaction will be dependent upon LSEG’s ability to integrate the businesses of LSEG and Refinitiv; there will be challenges associated with the integration and the delivery of synergies and/or the benefits expected as a result of the Transaction may not be achieved as anticipated or at all. There are also further risks in relation to the Transaction, existing risks to LSEG that will be impacted by the Transaction and new risks to LSEG as a result of the Transaction which are each described in the shareholder circular related to the Transaction dated 6 November 2019.

London Stock Exchange Group plc Annual Report 31 December 2019 63 Principal risks and uncertainties (continued)

RISK DESCRIPTION MITIGATION RISK LEVEL Competition Competitive markets are, by their very nature, dynamic, and (Executive Lead: Chief Executive Officer, Group Director for each division, Chief the effects of competitor activity can never be fully mitigated. Information Officer) Senior management and a broad range of customer-facing staff in all business areas are actively engaged with clients to The competitive environment in which LSEG operates has undergone, and continues understand their evolving needs and motivations. We have to undergo, transformational changes triggered by market participants, investors, established a Group Relationship Programme to co-ordinate infrastructure operators and regulators, as well as intensifying competition. The this across Group businesses globally. Group operates in a highly competitive industry. Continued consolidation has fuelled competition including between groups in different geographical areas. Sophisticated The Group undertakes constant market monitoring and pricing FMI providers are diversifying and expanding. As a result, LSEG faces competition revision to mitigate risks and ensure we are competitive. from market operators from the EU, US and Asia that are increasingly broadening Commercial initiatives are aligned with our clients and this is their propositions (organically, as well as through consolidation) to gain access to complemented by an ongoing focus on technology operations new product areas and geographies. and innovation. The Group’s Information Services business faces competition from a variety of sources, notably from index providers which offer indices and other benchmarking tools which compete with those offered by the Group as well as from other venues that offer market data relating to securities that are traded on the Group’s markets. As the Information Services offering diversifies and seeks to meet customer needs for new data sources, segments and asset classes, it is facing a broader range of competitors. In Post Trade Services, we continue to see increased clearing activity across a number of asset classes, in particular OTC derivatives products, reflecting the attractiveness of the Group’s current customer offering and open access philosophy. The competition within the post trade environment has also intensified due to a general industry move towards inter-operability of CCPs (where participants on trading platforms are offered a choice of CCPs), strengthened by regulatory developments, including MiFID II and MiFIR. Our Capital Markets operations face continuing risk from competitors’ commercial and technological offerings. There is strong competition for primary listings and capital raises from other global exchanges and regional centres. Private equity, venture capital and new options such as crowd-funding and crypto-currencies are increasingly being considered as alternatives methods of capital formation for issuers. We maintain a dedicated international team who promote the benefits of listing on our markets to international issuers, the global advisory community and other stakeholders. The Group will need to continue strong and collaborative dialogue with customers and other relevant industry stakeholders to ensure it remains responsive to changing requirements and is able to react in a timely manner. If competitors are quicker to access and deploy technology innovations such as artificial intelligence (AI), machine learning and analytics, they may achieve a valuable advantage which may impact the attractiveness of the Group’s offering and its relative profitability. Our integrated and business-led approach to technology innovation helps us to manage this risk and the Group is well advanced in investigating and applying numerous new technology innovations across its business portfolio. In Technology Services, there is intense competition across all our current activities and in some of our growth areas, in addition to strong incumbent providers. New entrants are increasing from both within and outside of our traditional competition base and some consolidation is evident. Start-ups, which may be sponsored by existing LSEG competitors or customers, are introducing new technology and commercial models to our customer base to which we need to respond with new products and services of our own. Continual customer dialogue, facilitated through our partnership approach and investment in product management and innovation are critical to understanding and managing the impact of changing customer requirements in our technology and other business lines.

London Stock Exchange Group plc 64 Annual Report 31 December 2019 Strategic Report Principal risks and uncertainties

RISK DESCRIPTION MITIGATION RISK LEVEL Transformation The Group’s exposure to transformation risk is mitigated through (Executive Lead: Chief Executive Officer, Chief Operating Officer) the application of the Group’s Enterprise Risk Management Framework to deploy consistent, appropriate Risk Management The Group is exposed to transformation risks (risk of loss or failure resulting from across the Group, both during and post-acquisition. The change/transformation or integration) as it continues to grow rapidly both governance of the Group following a merger or acquisition is organically and inorganically. Acquisitions may, in some cases, be complex or aligned and strengthened as appropriate. necessitate change to operating models, business models, technology and people. This is particularly likely for the current target acquisition of Refinitiv. In general, The Integration Management Office, reporting to the Executive the combined business’ success will be dependent upon its ability to integrate the Committee, has been established to oversee the completion of the businesses of LSEG and Refinitiv; there will be challenges associated with the planned acquisition of Refinitiv. Oversight during transformation is integration and the delivery of synergies, the benefits or business performance provided by a Steering Committee comprising Executive expected as a result of the transaction may not be achieved as anticipated or at all, Committee members with regular reports to the Board Risk and the costs to achieve the synergies and benefits may be higher than anticipated. Committee and the Board. This derives from internal (organic) change and change required by the integration The Group has an effective track record of integrating acquisitions of acquisitions whereby the Group targets specific synergy benefits, necessitating and delivering tangible synergies, supported by robust governance change to operating models, business models, technology and people. A failure to and programme management structures through the Group’s align the businesses of the Group successfully may lead to an increased cost base Change Framework to mitigate change-related risks. without a commensurate increase in revenue; a failure to benefit from future product and market opportunities; and risks in respect of capital requirements, regulatory relationships and management time. The additional effort related to M&A, especially to the potential acquisition of Refinitiv and post-transaction alignment activities, could have an adverse impact on the Group’s day-to-day performance and/or key strategic initiatives which could damage the Group’s reputation and financial performance. The size and complexity of current acquisition targets as well as those acquired in the past five years have increased the Group’s change management and transformation risks. However, the target acquisitions aim to increase the Group’s opportunities to compete on a global scale and diversify its revenue footprint by industry, geography and customer base. Reputation/Brand/IP LSEG has policies and procedures in place which are designed to (Executive Lead: Chief Executive Officer, Executive Committee) ensure the appropriate use of the Group’s brands and to maintain the integrity of the Group’s reputation. A number of the Group’s businesses have iconic national brands that are well- recognised at international as well as at national levels. The strong reputation LSEG actively monitors the use of its brands and other intellectual of the Group’s businesses and their valuable brand names are a key selling point. property, including monitoring for internet brand impersonation Any events or actions that damage the reputation or brands of the Group, such as and social media sentiment, in order to prevent, identify and those propagated via social media or caused by its misuse, could adversely affect address any infringements. the Group’s business, financial condition and operating results. The Group protects its intellectual property by relying upon a Failure to protect the Group’s intellectual property rights adequately could result in combination of trademark laws, copyright laws, patent laws, costs for the Group, negatively impact the Group’s reputation and affect the ability of trade secret protection, confidentiality agreements and other the Group to compete effectively. Further, defending or enforcing the Group’s contractual arrangements with its affiliates, customers, suppliers, intellectual property rights could result in the expenditure of significant financial and strategic partners and others. managerial resources, which could adversely affect the Group’s business, financial condition and operating results.

London Stock Exchange Group plc Annual Report 31 December 2019 65 Principal risks and uncertainties (continued)

FINANCIAL RISKS The risk of financial failure, reputational loss, loss of earnings and/or capital as a result of investment activity, lack of liquidity, funding or capital, and/or the inappropriate recording, reporting and disclosure of financial results, taxation or regulatory information.

RISK DESCRIPTION MITIGATION RISK LEVEL Credit risk Clearing (Executive Lead: Chief Financial Officer, Director of Post Trade, Financial Risk Committee) As CCP members continue to work towards strengthening their balance sheets, the risk to LSEG CCPs of a member default reduces, Clearing although continuing geopolitical uncertainty continues, and the CCPs in the Group are exposed to credit risk as a result of their clearing activities. banking sectors of some countries remain stressed. The financial A default by a CCP clearing member that could not be managed within the resources risks associated with clearing operations are further mitigated by: of the defaulted clearing member could adversely affect that CCP’s revenues and its customers’ reputation. CCPs authorised in the EU are required to make a proportion ––Strict CCP membership rules including supervisory capital, of their regulatory capital available to cover default losses after the defaulter’s financial strength and operational capability resources have been exhausted and prior to allocation of losses to non-defaulters and ––The maintenance of prudent levels of margin and default funds so, in extreme circumstances, a default could lead to a call on the Group CCPs’ own to cover exposures to participants. Members deposit margin, capital ‘skin-in-the-game’. CCPs may also be exposed to credit exposure to providers computed at least daily, to cover the expected costs which the of infrastructure services such as Central Securities Depositaries (CSDs) and clearing service would incur in closing out open positions in a commercial banks providing investment and operational services. volatile market in the event of the member’s default. A default In addition, certain CCPs within the Group have interoperability margin fund sized to cover the default of at least the two members with arrangements with other CCPs requiring collateral to be exchanged in proportion the largest exposures in each service using a suite of extreme but to the value of the underlying transactions. plausible stress tests mutualises losses in excess of margin amongst the clearing members The relevant clearing provider entities within the Group are therefore exposed to the risk of a default of other CCPs under such arrangements. ––Regular ‘Fire Drills’ are carried out to test the operational soundness of the CCPs’ default management processes Non-Clearing CCPs and other parts of LSEG Group are also exposed to credit risk as a result of ––Infrastructure providers are regularly assessed in line with policy placing money with investment counterparties on both a secured and unsecured Non-Clearing basis. Losses may occur due to the default of either the investment counterparty or Policies are in place to ensure that investment counterparties are of the issuer of bonds bought outright or received as collateral. The Group’s credit risk of good credit quality, and at least 95% of CCP commercial bank also relates to its customers and counterparties being unable to meet their deposits are secured. CCP and non-CCP counterparty obligations to the Group either in part or in full. concentration risk is consolidated and monitored daily at the Regulators are increasingly looking at the impacts of climate change on credit risks, Group level and reported to the Executive Committee and to the although methodologies are in their infancy. We do not believe this will give rise to Board Risk Committee, including limits and status rating. significant increased risks in the short term, and will monitor market development, in Group companies make a judgement on the credit quality of their particular the proposed climate stress tests as part of the UK Prudential Regulation customers based upon the customer’s financial position, the Authority Biennial Exploratory Scenario (BES) in 2021. recurring nature of billing and collection arrangements and, historically, a low incidence of default. For more information on this risk see the Post Trade Services section of the Segmental Review on pages 30–34, and Note 3 to the accounts, Financial Risk Management on pages 158–163.

London Stock Exchange Group plc 66 Annual Report 31 December 2019 Strategic Report Principal risks and uncertainties

RISK DESCRIPTION MITIGATION RISK LEVEL Market risk Clearing (Chief Financial Officer, Director of Post Trade) The margins and default funds referred to previously are sized to protect against latent market risk. The adequacy of these Clearing resources is evaluated daily by subjecting member and customer The Group’s CCPs assume the counterparty risk for all transactions that are cleared positions to ‘extreme but plausible’ stress scenarios encapsulating through their markets. In the event of default of their clearing members, therefore, not only historical crises, but theoretical forward-looking scenarios credit risk will manifest itself as market risk. As this market risk is only present in the and decorrelation events. All our CCPs are compliant with the event of default this is referred to as ‘latent market risk’. The latent market risk appropriate regulatory requirements regarding margin includes interest rate risk, foreign exchange risk, equity risk and commodity price calculations, capital and default rules. Latent market risk is risk as well as country risk, issuer risk and concentration risk. This risk is greater if monitored and managed on a day-to-day basis by the risk teams market conditions are unfavourable at the time of the default. within the clearing services. Committees overseeing market risks Non-Clearing meet on a regular basis. The Group is exposed to foreign exchange risk as a result of its broadening Non-Clearing geographical footprint. There are, however, also benefits of global diversification Foreign exchange (FX) risk is monitored closely and translation including reduced exposure to local events such as the UK Brexit vote and the risk is managed by matching the currency of the Group’s debt geopolitical tensions. to its earnings to protect key ratios and partially hedge The Group is exposed to interest rate risk through its borrowing activities (including currency net assets. FX derivatives including cross-currency to support M&A objectives) and treasury investments. Further changes in interest swaps are used under a control framework governed by LSEG rates in 2020 may increase the Group’s exposure to these risks. Board approved policy. Similar to credit risks, regulators are also considering the impacts of climate change The split between floating and fixed debt is managed to support on market (systemic) risks, and whilst we do not foresee any short-term material the Group’s target of maintaining an interest coverage ratio that risks, we will also keep this under review. underpins a good investment grade credit rating. Authorised derivatives can be used to: –– transform fixed rate bond debt, to supplement a mix of short dated commercial paper and floating rate loan borrowings, to achieve the Group’s policy objective, and / or ––hedge prospective FX and interest rates ahead of the completion of a planned M&A transaction to protect the financial position of the Group. For more information on this risk, see Note 3 to the accounts, Financial Risk Management on pages 158–163.

London Stock Exchange Group plc Annual Report 31 December 2019 67 Principal risks and uncertainties (continued)

RISK DESCRIPTION MITIGATION RISK LEVEL Liquidity risk Clearing (Chief Financial Officer, Director of Post Trade, Financial Risk Committee) The Group’s CCPs have put in place regulatory compliant liquidity plans for day-to-day liquidity management, including Clearing contingencies for stressed conditions. The Group’s CCPs have There are two distinct types of risk to which the Group’s CCPs are exposed to that are multiple layers of defence against liquidity shortfalls including commonly referred to as liquidity risk – market liquidity risk and funding liquidity intraday margin calls, minimum cash balances, access to risk. The former is the risk that it may be difficult or expensive to liquidate a large or contingent liquidity arrangements, and, for certain CCPs, concentrated position and is addressed under market risk. The latter is the risk that access to central bank liquidity. the CCP may not have enough cash to pay variation margin to non-defaulters or to physically settle securities delivered by a non-defaulter that cannot be on-sold to a Under the Enterprise Risk Management Framework, CCP defaulter and this is the subject of this section. investments must be made in compliance with the Group CCP Financial Risk Policy (as well as the policies of the CCPs The Group’s CCPs collect clearing members’ margin and/or default funds themselves). These policies stipulate a number of Risk contributions in cash and/or in highly liquid securities. To maintain sufficient Management standards including investment limits (secured ongoing liquidity and immediate access to funds, the Group’s CCPs deposit the cash and unsecured) and liquidity coverage ratios. Committees received in highly liquid and secure investments, such as sovereign bonds and overseeing CCP investment risk meet regularly. reverse repos, as mandated under EMIR; securities deposited by clearing members are therefore held in dedicated accounts with CSDs and/or International Central Each CCP monitors its liquidity needs daily under stressed and Securities Depositaries (ICSDs). The Group’s CCPs also hold a small proportion of unstressed assumptions and reports to the Group Financial Risk their investments in unsecured bank and money market deposits subject to the Committee each month. limitations imposed by EMIR. The successful operation of these investment activities Non-Clearing is contingent on general market conditions and there is no guarantee that such Requirements for liquidity including headroom requirements are investments may be exempt from market losses. set out in the Group’s Board approved Treasury Policy. The Group Non-Clearing maintains appropriately sized liquidity facilities for business as Liquidity risk in a non-clearing context is the risk that the firm may be unable to usual and, from time to time, large scale acquisitions and monitors make payments as they fall due. its requirements on an ongoing basis. Stressed facility headroom is assessed regularly and on a one-off basis for working capital reviews associated with large scale acquisitions using plausible downside business projections. Group Treasury risk is monitored daily and is managed within the constraints of a Board approved policy by the Group Treasury team and is overseen by the Treasury Committee (a sub- Committee of the Financial Risk Committee, both chaired by the CFO). An update on Group Treasury risks and actions is provided monthly to the Financial Risk Committee and to each meeting of the Board Risk Committee. Capital risk The Group’s Capital Management Policy provides a framework (Chief Financial Officer, Financial Risk Committee) to ensure the Group maintains suitable capital levels (both at Group and solo entity levels), and effectively manages the risks Principal risks to managing the Group’s capital are: thereof. The Group’s Treasury Policy recognises the need to ––In respect of regulated entities, capital adequacy compliance risk (the risk that observe regulatory requirements in the management of the regulated entities do not maintain and report sufficient qualifying capital to meet Group’s resources. regulatory requirements) and capital reporting compliance risk (the risk that The Risk Appetite approved by the Board includes components regulated entities fail to comply with capital reporting and regulatory obligations). related to the Group’s leverage ratios and capital risks; Key Risk If a regulated entity in the Group fails to ensure that sufficient capital resources are Indicators are monitored regularly. The Group maintains an maintained to meet regulatory requirements, this could lead to loss of regulatory ongoing review of the capital positions of its regulated entities to approvals and/or financial sanctions ensure that they operate within capital limits which are overseen ––In respect of regulated and unregulated entities, commercial capital adequacy and by the Financial Risk Committee, the Executive Committee and quality risk (the risk that Group and solo entities do not maintain both sufficient the Board. The Group can manage its capital structure by varying quantity and quality of capital to meet commercial requirements) and investment returns to shareholders, issuing new shares or increasing or return risk (the risk that capital is held in subsidiaries or invested in projects that reducing borrowings. The Board reviews dividend policy and generate a return that is below the Group’s cost of capital) funding capacity on a regular basis and the Group maintains comfortable levels of debt facility headroom. ––Availability of debt or equity capital (whether specific to the Group or driven by general financial market conditions) The Group regularly assesses debt and equity markets to maintain access to new capital at reasonable cost. The Group is mindful of potential impacts on its key metrics when considering changes to its capital structure. For more information on this risk, see Note 3 to the accounts, Financial Risk Management on pages 158–163.

London Stock Exchange Group plc 68 Annual Report 31 December 2019 Strategic Report Principal risks and uncertainties

OPERATIONAL RISKS The risk of loss, or other adverse consequences to the business, resulting from inadequate or failed internal processes, people and systems, or from external events.

RISK DESCRIPTION MITIGATION RISK LEVEL Technology The performance and availability of the Group’s systems are (Responsibility: Chief Operating Officer, Chief Technology Officer) constantly reviewed and monitored to prevent problems arising and where possible, ensure a prompt response to any potential LSEG is highly dependent on the development and operation of its sophisticated service-impacting incident. technology and advanced information systems and those of its third-party service providers. Technology failures may impact our clients and the orderly running of our The Group continues actively to identify, manage and mitigate markets, potentially leading to system outages. risks associated with the consolidation of technology development and operations. Regular rigorous business impact and operational The Group is reliant on outsourced service providers for key technology services risk scenario analysis is performed in conjunction with the Group and data provision and actively manages relationships with strategic technology Risk, Group Business Continuity and Crisis Management functions suppliers to avoid a breakdown in service provision. The Group also actively to identify, assess and remedy potential system and governance monitors new technological developments and opportunities for innovation. vulnerabilities. In addition, all technology solutions are comprehensively tested by both LSEG Technology and third-party quality assurance providers as appropriate; functional, non- functional, user-acceptance and other testing is performed across a number of technical environments to ensure products are ready for deployment. The Group’s technology teams mitigate the risk of resource over-stretch by ensuring prioritisation of key development and operations activities, and resource utilisation and allocation are kept under constant review. The LSEG Technology systems are designed to be software and hardware fault tolerant and alternative systems are available in the unlikely event of multiple failures from which the system is unrecoverable. The Group has worked to enhance its service management capability and tooling to enhance technology service delivery. The Group actively manages relationships with key strategic technology suppliers to avoid any breakdown in service provision which could adversely affect the Group’s businesses. Where possible the Group has identified alternative suppliers that could be engaged in the event of a third party failing to deliver on its contractual commitments. The Group actively monitors new technological developments and opportunities such as blockchain and AI. For more information, see the Technology Services section of the Segmental Review on page 39.

London Stock Exchange Group plc Annual Report 31 December 2019 69 Principal risks and uncertainties (continued)

RISK DESCRIPTION MITIGATION RISK LEVEL Physical threats Security threats are treated with the utmost seriousness. The (Executive Lead: Chief Operating Officer) Group has robust physical security arrangements. The Group is reliant upon secure premises to protect its employees and physical The Group is supported by relevant governmental organisations in assets as well as deploying appropriate safeguards to ensure uninterrupted our key areas of operation. Security teams respond to intelligence operation of its IT systems and infrastructure. received and liaise closely with police and global government agencies. Across major hubs covering the UK, Europe, the Terrorist attacks and similar activities directed against our offices, operations, Americas and Asia, the Group maintains close monitoring of computer systems or networks could disrupt our markets, harm staff, tenants and geopolitical threats and horizon scanning through a third-party visitors, and severely disrupt our business operations. Civil or political unrest could security monitoring service. Where events are detected, response impact companies within the Group. Long-term unavailability of key premises support services are mobilised to support as required. The Group could lead to the loss of customer confidence and reputational damages. has well established and regularly tested business continuity and Climate change may cause an increase in the severity and frequency of extreme crisis management procedures. The Group assesses its weather events across the locations where LSEG operates. This could disrupt dependencies on critical suppliers and ensures robust contingency business operations, through damage to offices and infrastructure, and cause measures are in place. harm to staff. Model risk LSEG businesses have in place industry standard model risk (Executive Lead: Model Risk Committee) control and governance pillars, including a Model Risk Policy, model inventory tools, documentation templates and standards. The Group defines model risk as the potential loss an institution may incur, as a Robust model validation is in place to ensure our models are fit consequence of decisions that could be principally based on the output of models, for purpose and appropriately developed and implemented. The due to errors in the development, implementation or use of such models. Model Risk Management team provides model risk status reports The key model risks are in CCP margining, Yield Book mortgage valuation, on a quarterly basis to the Model Risk Committee, which oversees Environmental, Social and Governance (ESG) scoring and the firms’ capital models. model risk across the Group. Model risk can be both reputational and financial. Security threats – Cyber The Group continues to invest in and enhance its information (Executive Lead: Chief Information Officer, Chief Information Security Officer) security control environment, cyber defences and operational processes, as it delivers its Board approved Cyber Security Strategy. Public and private organisations continue to be targeted by increasingly sophisticated cyber threats. Extensive organisational, technological and culture measures aligned to the National Institute of Standards and Technology Threats such as ransomware, theft of customer data and distributed denial of service (NIST) control framework are in place to prevent, detect, respond attacks were increasingly significant to the financial industry as a whole in 2019. to and recover from cyber security threats. The Group’s data, IT systems and networks, and those of its third-party service Regular testing of security controls and incident response providers, may be vulnerable to threats, such as cyber-attacks, data breach or other processes is undertaken, both internally across our three lines of leakage of sensitive data, which could adversely affect the Group’s business. defence model and externally by independent third parties to Additionally, new emerging technologies such as cloud computing and AI could provide assurance over the effectiveness of cyber security impact our cyber risk profile. controls and recovery processes. A major information security breach that results in data and intellectual property The Group monitors intelligence and liaises closely with global loss, system unavailability or loss of integrity of data or systems, could have a Government agencies as well as industry forums and regulators to significant negative impact on our reputation, financial results and the confidence help improve our ability to respond to the evolving threats faced by of our clients and could lead to fines and regulatory censure. us and our industry.

London Stock Exchange Group plc 70 Annual Report 31 December 2019 Strategic Report Principal risks and uncertainties

RISK DESCRIPTION MITIGATION RISK LEVEL Change management The risks associated with change are mitigated by effective (Executive Lead: Chief Operating Officer, Chief Information Officer) implementation of the Group’s Change framework. This includes Board oversight across the Group’s change portfolio and project The considerable change agenda exposes the Group to the risk that change is either pipeline, to ensure these align to the Group and Divisional misaligned with the Group’s strategic objectives or not managed effectively within strategies and support our financial plans. Appropriate time, cost and quality criteria. governance, risk and executive oversight is exercised over The volume of change is driven by both internal and external factors. Internal factors individual programmes and projects based on the scale, include the diversification strategy of the Group and its drive for technology complexity and impact of the change. The purpose of this innovation, consolidation and operational resilience. External factors include the oversight is to confirm changes do not breach the Group’s risk changing regulatory landscape and requirements which necessitate changes to our appetite, are compliant with the approved project management systems and processes. Design defects, errors, failures or delays associated with new, policy and to oversee the management of budget, resource, modified or upgraded technology, products or services introduced by LSEG and escalations, risks, issues and dependencies. Refinitiv, and therefore the combined business, could negatively impact its business. For software specific development, software design methodologies, testing regimes and test environments are continuously being enhanced to minimise implementation risk. For more information, see the Chair’s statement on pages 4–5, and the Chief Executive’s statement on pages 6–9. Settlement and custodial risks Operational risk related to settlement and custodial operations is (Executive Lead: Director of Post Trade) minimised via highly automated processes reducing administrative activities while formalising procedures for all services. The Group’s CCPs are exposed to operational risks associated with clearing transactions and the management of collateral, particularly where there are manual The operations of the settlement service are outsourced to the processes and controls. While the Group’s CCPs have in place procedures and controls European Central Bank (TARGET2-Securities). to prevent failures of these processes, and to mitigate the impact of any such failures, The CSD mitigates technology risk by providing for redundancy of any operational error could have a material adverse effect on the Group’s reputation, systems, daily backup of data, fully updated remote recovery sites business, financial condition and operating results. and SLAs with outsourcers. The Group provides routing, netting and settlement and custody services through its Our CSD and CCPs Business Continuity Plan covers all the critical CSD to ensure that securities are settled in a timely and secure manner. There are operational processes and related activities. operational risks associated with such services, particularly where processes are not fully automated. Compliance The Group continues to maintain systems and controls to mitigate (Executive Lead: Chief Executive Officer, Executive Committee) compliance risk. Compliance policies and procedures are regularly reviewed to ensure that Group entities and staff are compliant with There is a risk that one or more of the Group’s entities may fail to comply with applicable laws and regulations and uphold our corporate the laws and regulatory requirements to which it is, or becomes, subject. standards. All staff across the Group are subject to mandatory In this event, the entity in question may be subject to censures, fines and other compliance training. regulatory or legal proceedings. Data Governance Data standards are defined through the Chief Data Office (CDO) (Executive Lead: Chief Information Officer, Chief Data Officer) which identifies the various data held across the Group, access rights/entitlements, any legal or regulatory restrictions which may Through its various entities, LSEG collects, owns, licenses, calculates, transforms, apply and how such data is used and the intended future uses. and distributes data in many forms (e.g. structured, unstructured, electronic, and The framework sets out the principles to ensure Group Data is print formats, audio-visual data, production, testing, archive data, derived data, etc.). of the highest quality and meets the highest standards, while LSEG is accountable to its customers, counterparties, owners, vendors, regulators, highlighting key characteristics of data which are important for and the public, for the careful and proper protection and use of its data. As such the measurement, oversight, and governance. Group has defined a consistent, standardised approach to procurement, collection, ingestion, transformation, quality, storage, retention, calculations and disposition of its data. Failure to govern the Group’s data effectively, could result in this data being unfit for purpose with respect to availability, completeness, accuracy, validity, usage, entitlement and timeliness. This could result in the Group or its customers and stakeholders placing reliance on inadequate data when making strategic or operational decisions which could adversely affect the Group’s business, financial condition and operating results.

London Stock Exchange Group plc Annual Report 31 December 2019 71 Principal risks and uncertainties (continued)

RISK DESCRIPTION MITIGATION RISK LEVEL Employees and culture We focus on a number of strategic initiatives to ensure we attract (Executive Lead: Group HR Director) and retain the right calibre of talent for our business and continue to facilitate a culture of high performance. The calibre and performance of our leaders and colleagues is critical to the success of the Group. We have a rigorous in-house recruitment and selection process, to ensure that we are bringing the best possible talent into the The Group’s ability to attract and retain key personnel is dependent on several organisation, in terms of their skills, technical capabilities, cultural factors. This includes organisational culture and reputation, prevailing market fit and potential. We undertake a comprehensive annual review of conditions, compensation packages offered by competing companies, and any critical roles, and ensure we have succession plans in place to regulatory impact thereon. These factors also encompass the Group’s ability to minimise the impact of losing critical personnel. We monitor the continue to have appropriate variable remuneration and retention arrangements attrition in each division and country, in addition to any critical in place, which help drive strong business performance and alignment to long-term colleague turnover, so that appropriate mitigation can be taken shareholder value and returns, impact the size of the local labour force with relevant where needed. experience, and the number of businesses competing for such talent. Whilst the Group focuses very carefully on the attraction and retention of talent, if We aim to remove barriers to our colleagues’ overall sense of unsuccessful, it may adversely affect the Group’s ability to conduct its business engagement, proactively measuring how satisfied they are with through an inability to execute business operations and strategies effectively. their working experience at LSEG, and the extent to which they would recommend it as a place to work, via our annual Cultivating a diverse talent pool and an inclusive culture is of great importance to engagement ‘Have Your Say’ survey. the Group to reflect the societies we serve, both for the innovation benefits that diversity of thought help to promote, but also in light of increased industry-wide We recognise that the overall wellbeing of our colleagues is vital expectations for ESG transparency. If the Group were unable to attract, support for our continued performance and have introduced a proactive and retain diverse talent, it may have an adverse impact on the Group’s ability to approach to wellbeing in the UK, which we are in the process of deliver its strategic objectives and its reputation. rolling out globally. This looks to improve wellbeing across five dimensions: physical, mental, financial, social purpose, and Whilst our preparations are comprehensive in relation to Brexit, a common risk work-life balance. We also operate a Speak Up campaign, designed across the Group is the uncertainty surrounding the status of the EU citizens in to provide our colleagues with the confidence to speak up and raise the UK and UK citizens in the EU. concerns when they witness or suspect inappropriate behaviour, Pandemics represent a potential threat to employee health and wellbeing. misconduct or wrongdoing that conflicts with our values. Please see also Supporting sustainable growth for details regarding employee Career development remains a key enabler for success, and we matters and Corporate Governance for information about Workforce Engagement. have a carefully managed learning and development programme which enables us to focus on providing colleagues with a range of courses, materials and tools to support their development. We strive to inspire diverse talent to pursue careers at LSEG and encourage industry-wide change to increase equal opportunity for all, across every part of LSEG. We support diversity and have established targets for female representation at senior management level and overall as well as having signed the Women in Finance Charter. Performance management plays a key role in mitigating retention and performance risk at LSEG, and the Group has in place a robust approach to assess performance against financial objectives, strategic deliverables, and the extent to which colleagues role model the Group’s values and behaviours. We also regularly benchmark our reward, benefits and incentive systems to ensure they are competitive. LSEG continuously engages with the EU and the UK regulators to minimise the impact of Brexit on our colleagues. The Group adopts preventative critical monitoring and contingency arrangements to manage potential threats such as pandemics. For more information, see Supporting sustainable growth on pages 40–50 and Remuneration Report on pages 98–128.

London Stock Exchange Group plc 72 Annual Report 31 December 2019 Strategic Report Principal risks and uncertainties

EMERGING RISKS Risks which risks which are new to the Group or which are difficult to quantify due to their remote or evolving nature. RISK DESCRIPTION MITIGATION RISK LEVEL Climate-related Risk We support consistent global standards and encourage continued (Executive Lead: Group Corporate Sustainability Committee) alignment between the EU and UK on sustainable finance. We have been members of the EU High Level Expert Group and the International organisations, governments and regulators are focused on Technical Expert Group, and the FCA/PRA Climate Financial Risk integrating climate risks and opportunities into investment decision making, Forum. To further align with the TCFD recommendations, the to enable transition to a low carbon economy. This is an area of emerging Group has developed climate-related risks scenario over both the and wide-ranging policy making, impacting financial market participants medium and longer term, and how these may impact credit, and corporates. operational, market and liquidity risks. The increased focus from regulators, investors and other stakeholders, has In line with increased disclosure requirements for corporations and generated a requirement for enhanced climate-related risk oversight. financial markets participants, LSEG has taken proactive steps to Climate-related risks include Transition risks, Litigation risks and Physical risks develop its methodology to define and model how climate change (further information is provided under Physical Threats risk). impacts its businesses. The aim is to reinforce the Group’s resilience to acute physical risks today and chronic physical risks With respect to this, it is acknowledged that although climate-related risks have in the future, and to address transition risks, to be aligned with the been categorised as an emerging risk, they are inherently linked to other strategic, Task Force on Climate-related Financial Disclosures (TCFD) financial and operational risks, as well as commercial opportunities. recommendations, be prepared for potential future mandatory Please see also Supporting sustainable growth for details regarding reporting requirements and to protect the Group’s reputation – See Corporate Sustainability. the TCFD disclosures section under Supporting Sustainable Growth for more information. To further align with the TCFD recommendations, the Group has developed climate-related risk scenarios over both the medium and longer term, to help identify how these scenarios may impact credit, operational, market and liquidity risks using the most material physical and transition risks for the business. From the review of published climate scenarios, two scenarios from the International Energy Agency World Energy Outlook have been selected for transition risk, and for physical risk, two scenarios from the Intergovernmental Panel on Climate Change are considered most appropriate. These scenarios cover a <2 degree and 3-4 degree scenario, over both the medium (2025-2035) and longer (2050) term. Looking ahead, we plan to continue to integrate climate risk into our existing risk management frameworks. More information on our environmental management can be found in the supporting sustainable growth section of this report on pages 47–49. Emerging Technology The Group continues to maintain systems and controls to mitigate (Executive Lead: Chief Information Officer) the risk resulting from emerging technology. Risk arising from the Group’s use of AI is identified, assessed, managed and reported The increased integrated artificial intelligence (AI) in digital transformation through the current ERMF. We align with industry best practices strategies brings with it associated risks such as inherent bias in the historical data and guidance when considering the trustworthiness and bias in AI and behaviour patterns which feed AI algorithms. This may give rise to automated systems and AI aided decision making. The Group ensures the use decisions which are not aligned with current societal expectations or organisational of AI is fair, explainable and transparent, secure and safe. The values. AI use by cyber hackers can also render cyber security defence and continuous development of AI has the potential to impact industry detective mechanisms ineffective. behaviour and our business, we will continue to monitor and Regulators are considering the application of existing or new frameworks to manage manage this risk closely. the development of innovative financial services technologies, which are important for maintaining the resilience and stability in the market and allowing innovation with emerging technology.

London Stock Exchange Group plc Annual Report 31 December 2019 73

Governance Board of Directors Board of Directors

Board structure as at 31 December 2019 ––Chair, who was independent on appointment ––One Senior Independent Director ––Eight other Non-Executive Directors ––Three Executive Directors

Director changes during the year Don Robert David Schwimmer The following Directors were appointed as Chair of the Company and the Group Chief Executive Officer. Non-Executive Directors (NED) during the year: Don Nomination Committee. Appointed to the Board in August 2018. Robert joined the Board as a NED on 1 January 2019 Appointed to the Board on 1 January 2019 and and became Chair on 1 May 2019. Cressida Hogg Key areas of experience: Market structure, corporate finance, subsequently Chair in May 2019. joined the Board on 8 March 2019. capital markets, mergers and acquisitions, emerging markets. Key areas of experience: Data and analytics, technology, David brings significant knowledge of market structure and investment banking to the Board. Sir Donald Brydon CBE stepped down as a NED and international business, financial services, mergers and acquisitions. Relevant past experience: Prior to joining the Group in August Chair on 1 May 2019. Don brings to the Board a strong track record in the global 2018, he spent 20 years at Goldman Sachs where he held a financial services sector and a deep understanding of number of senior roles, most recently as Global Head of Market Additionally, on 1 January 2020 Dominic Blakemore technology, data and analytics as well as regulatory knowledge Structure and Global Head of Metals & Mining. During his tenure, gained from his Bank of England role. he also served as Chief of Staff to Lloyd Blankfein, who was then was appointed as a NED and will become Chair of the President and COO of Goldman Sachs, and also spent three years Audit Committee following the conclusion of the Relevant past experience: Don joined Experian plc in 2001. in Russia as Co-Head Russia/CIS. Prior to his appointment as Chairman in 2014, a position he held Group’s AGM in April 2020. A copy of his biography is until July 2019, he was Group Chief Executive Officer from 2006 Prior to joining Goldman Sachs, he practiced law at Davis Polk also included in this section of the Annual Report. to 2014 having previously held various other senior roles & Wardwell. He holds a B.A. from Yale University, and post including Chief Executive Officer of Experian North America. graduate degrees in law (JD) and international affairs (MALD) from Harvard University and The Fletcher School of Law and A short biography is provided for each Board Director Previous senior roles include: President of Credco, Inc., Diplomacy, respectively. Chairman of the US Consumer Data Industry Association, Director listed on pages 75–77. More detailed biographies for and Trustee of the National Education and Employer Partnership Other current appointments: NED at the Center for New the Board of London Stock Exchange Group plc are Taskforce, NED First Advantage Corp and Senior Independent American Security (not-for-profit). available on the company’s website at: www.lseg. Director at Compass Group Plc, a NED of the Court of Directors, Bank of England and Chairman of Achilles Group Limited. com/about-london-stock-exchange-group/ Other current appointments: Chairman of Validis Holdings london-stock-exchange-group-board. Limited. A Partner of Corten Capital. Don is a Visiting Fellow at Oxford University. With effect from 1 April 2020, Don will assume the role of Chair of the London School of Hygiene & Tropical Medicine Council.

Committee membership key David Warren Raffaele Jerusalmi Audit Nomination Group Chief Financial Officer. Executive Director, Chief Executive Officer of Remuneration Risk Appointed to the Board in July 2012. Borsa Italiana and Director of Capital Markets. Group Executive Committee Chair Appointed to the Board in June 2010. Key areas of experience: Accounting, corporate finance, investor relations, mergers and acquisitions, strategy, treasury Key areas of experience: Capital markets, corporate finance, management. fixed income, equity and derivatives trading. David brings significant international financial management Raffaele brings significant experience in capital markets and in expertise to the Board. fixed income, equity and derivatives trading to the Group. Relevant past experience: David was appointed Group CFO in He has worked for Borsa Italiana S.p.A. for over 20 years and is July 2012 and also served as Interim CEO and Group CFO from Borsa Italiana’s Chief Executive Officer as well as the Group’s 29 November 2017 to 31 July 2018. Prior to being appointed CFO Director of Capital Markets. Raffaele also holds a number of other of London Stock Exchange Group, David was Chief Financial internal senior positions within the Group including: the Vice Officer of NASDAQ from 2001 to 2009 and Senior Adviser to the Chairmanship of Monte Titoli, MTS and CC&G and Chairman of CEO of NASDAQ from 2011 to 2012. Other senior roles David has Elite S.p.A.. On 2 June 2019 he was appointed “Cavaliere Ordine al held include: Chief Financial Officer at the Long Island Power Merito della Repubblica Italiana”, the first rank knighthood of the Authority of New York and Deputy Treasurer of the State Italian Republic. of Connecticut. Relevant past experience: Prior to joining Borsa Italiana, Other current appointments: None. Raffaele was Head of Trading for Italian Fixed Income at Credit Suisse First Boston. Raffaele was also a member of Credit Suisse’s proprietary trading group in London as well as representing Credit Suisse First Boston on the Board of MTS S.p.A.. Prior to joining Credit Suisse, he was Head of Trading for the fixed income and derivatives divisions at Cimo S.p.A. in Milan. Other current appointments: None.

London Stock Exchange Group plc Annual Report 31 December 2019 75 Board of Directors (continued)

Committee membership key Audit Nomination Remuneration Risk Group Executive Committee Chair

Jacques Aigrain Marshall Bailey OBE Non-Executive Director and Non-Executive Director. Chair of the Remuneration Committee. Appointed to the Board in September 2018. Appointed to the Board in May 2013. Key areas of experience: Banking and capital markets, Key areas of experience: Client management, corporate insurance, government regulation. finance, corporate governance, post trade and clearing, Marshall has 30 years’ experience in the financial services sector investment management, mergers and acquisitions, strategy. and substantial experience of leading complex international Jacques brings significant expertise and knowledge of global committees and boards. In addition to being a member of the post trade and clearing and investment management to the LSEG Board, he is also currently Chair of the Group subsidiary, Board. He also holds a PhD in Economics from the University of LCH Group Holdings Limited. Paris (Sorbonne). Relevant past experience: Marshall was previously an Relevant past experience: Jacques was Chair of LCH Group Independent Director on the Board of UK Financial Investments Holdings Limited from 2010 to 2015. He has also been a NED of Ltd (UKFI), the government body overseeing the UK government’s Resolution Ltd, a Supervisory Board member of Deutsche ownership of financial assets after the 2008 financial crisis. He Lufthansa AG, a NED of the Qatar Financial Centre Authority and also had an active role in setting codes of conduct for the Fixed a NED of Swiss International Airlines AG (a subsidiary of Deutsche Income Currencies and Commodities (FICC) markets, working Lufthansa AG). Jacques was also Chief Executive Officer of Swiss with the Market Participants Group of the Bank for International Re from 2006 to 2009. Settlements (BIS). Marshall volunteers on the Board of the East End Community Foundation in Tower Hamlets. He was previously Prior to 2001 (when he joined Swiss Re), Jacques spent 20 years a NED of Chubb European Group from 2015 to 2018. with J.P. Morgan Chase, working in the New York, London and Paris offices. Other current appointments: Marshall is Chairman of the Financial Services Compensation Scheme. He is also Chairman of Other current appointments: Jacques is currently a Senior CIBC World Markets Plc in London and he is the Representative Advisor at Warburg Pincus LLC, Chairman of LyondellBasell for the Public Investment Fund in Saudi Arabia on the Board of Industries NV, Chairman of Singular SAU and a NED of WPP plc. the National Commercial Bank in Jeddah.

Professor Kathleen DeRose Paul Heiden Non-Executive Director. Senior Independent Director and Chair Appointed to the Board in December 2018. of the Audit Committee. Appointed to the Board in June 2010. Key areas of experience: FinTech, financial markets, asset management. Key areas of experience: Corporate finance and accounting, Having spent 30 years working in global finance and asset technology and engineering, corporate governance and risk, management, Kathleen brings significant FinTech and global commercial manufacturing and supply chain. financial market expertise to the Board. Paul is a chartered accountant and provides the Board and the Relevant past experience: Kathleen previously held a number Audit Committee with relevant financial expertise, gained of senior roles at Credit Suisse Group AG from 2010-2015. Other through a long career of senior finance and management roles roles Kathleen has undertaken have included: Managing Partner, across a wide range of business sectors. Head of Portfolio Management and Research at Hagin Relevant past experience: Paul was previously a NED of United Investment Management (2006 to 2010) and Managing Director, Utilities Group plc, Bunzl plc, Filtrona plc and Meggitt plc and Head of Large Cap Equities at Bessemer Trust (2003 to 2006). Non-Executive Chairman of A-Gas (Orb) Limited, Talaris Topco Prior to 2003, Kathleen also held a number of senior roles Limited and Intelligent Energy Holdings plc. at Deutsche Bank and JPMorgan Chase (formerly Chase Paul was Chief Executive Officer of FKI plc from 2003 to 2008, Manhattan Bank). Executive Director of Rolls-Royce plc from 1997 to 1999 and In addition to her senior executive positions, Kathleen served Group Finance Director of Rolls-Royce plc from 1999 to 2003. as a board member of EDGE (Economic Dividends for Gender He also held previous senior finance roles at Hanson plc and Equality) from 2014 to 2015, and she was founding Chair of Mercury Communications. Evolute Group AG from 2016 to 2017. Other current appointments: Paul is Non-Executive Chairman Other current appointments: Kathleen is a NED of Evolute of MIR Bidco SA and a NED of Project Dart Topco Limited. Group AG, Voya Financial, Inc and a Clinical Associate Professor of Finance at The New York University Leonard N. Stern School of Business where she leads the FinTech programme and is the Fubon FinTech Director.

London Stock Exchange Group plc 76 Annual Report 31 December 2019 Governance Board of Directors

Cressida Hogg CBE Stephen O’Connor Dr Val Rahmani Non-Executive Director. Non-Executive Director and Non-Executive Director. Appointed to the Board in March 2019. Chair of the Risk Committee. Appointed to the Board in December 2017. Appointed to the Board in June 2013. Key areas of experience: Chair, corporate governance, Key areas of experience: Technology, technical risk infrastructure and private equity, mergers and Key areas of experience: OTC derivatives, risk management, management, innovation, corporate governance, strategy. acquisitions, pensions. capital markets, clearing, corporate finance. Val brings significant expertise and knowledge of technology and Cressida brings significant board experience to the Group Stephen brings international expertise in clearing and technical risk management to the Board gained from almost 30 combined with a strong corporate background in infrastructure counterparty risk management to the Board. He has worked years with IBM and four years as CEO of a cyber security start up. and private equity. extensively with global regulators in the area of financial services Val has wide-ranging experience as a senior executive in the Relevant past experience: Cressida spent nearly 20 years at market reform. technology sector fulfilling the role of general manager, 3i Group plc and was one of the co-founders of 3i’s infrastructure Relevant past experience: Stephen was Chairman of the board member, start up mentor, management consultant business in 2005, becoming Managing Partner in 2009. International Swaps and Derivatives Association from 2011 to and public speaker. Val holds a DPhil in Chemistry from During this time, Cressida advised on all of 3i’s infrastructure 2014 having been appointed as a NED in 2009. Stephen also the University of Oxford. transactions. worked at Morgan Stanley for 25 years, where he was a member Relevant past experience: Val is a former NED of Aberdeen She was also Global Head of Infrastructure at Canada Pension of the Fixed Income Management Committee, serving in a Asset Management plc and Teradici Corporation and former Plan Investment Board between 2014 and 2018. number of senior roles. Chair of the Innovation Panel at Standard Life Aberdeen plc. Cressida has a BA from the University of Oxford and an MBA Stephen has served as a member of the High Level Stakeholder Other current appointments: Val currently serves as a NED from the London Business School. Group for the UK Government’s review of the Future of Computer and member of the Audit Committee at RenaissanceRe Holdings Trading in Financial Markets and as Vice-Chairman of the Limited. She is also a NED of Computer Task Group Inc, where she Other current appointments: Cressida is the Non- Financial Stability Board’s Market Participants Group on Financial chairs the Compensation Committee and serves as a member of Executive Chair of Land Securities Group plc and NED of Benchmark Reform. He was a NED of OTCDerivNet Ltd from 2001 the Audit and Governance Committees. Val is a NED and member Troy Asset Management. to 2013 and was Chairman from 2001 to 2011. of the Compensation Committee of the private company Entrust Other current appointments: Stephen serves as Chairman of Datacard and a NED of the early stage company, Rungway. Quantile Technologies Limited. He is a member of the Scientific Advisory Board of the Systemic Risk Centre (LSE). Stephen is also a NED of the FICC Market Standards Board Limited and HSBC Bank plc where he became Chairman of the bank in August 2018.

Professor Andrea Sironi Dr Ruth Wandhöfer Dominic Blakemore Non-Executive Director. Non-Executive Director. Non-Executive Director (and Chair of Audit Appointed to the Board in October 2016. Appointed to the Board in October 2018. Committee following the conclusion of the Group’s AGM in April 2020). Key areas of experience: Finance, financial risk management, Key areas of experience: Banking, financial services, FinTech, banking regulation. market regulation. Appointed to the Board in January 2020. Andrea provides significant banking and finance experience to Ruth brings to the Board significant knowledge of both the Key areas of experience: Accounting, corporate finance, the Board. business and banking regulatory landscape in addition to investor relations, mergers and acquisitions, strategy, treasury considerable expertise in regulatory and technology change Relevant past experience: Andrea was an Independent NED of management. UniCredit Group until February 2019. He was a NED of Banco within complex businesses. Dominic is currently Group Chief Executive Officer of Compass Popolare Società Cooperativà, SAES Getters S.p.A. and Cogentech Ruth’s career spans more than 18 years in financial services, Group PLC, a role he assumed in January 2018. Dominic’s S.c.a.r.l.. He has been the Vice Chairman of Banca Aletti & C S.p.A. which includes more than a decade spent at the global from April 2009 to October 2012. He has also been a Member of investment bank, Citi. previous roles at the Compass Group included: Group Finance the Fitch Academic Advisory Board from June 2006 to June 2010. Director from 2012 to 2015 and Group Chief Operating Officer, Relevant past experience: Ruth was previously Global Head of Europe from 2015 to 2017, before becoming Deputy Chief Other current appointments: Andrea is the Chairman of Borsa Regulatory & Market Strategy for Citi Treasury and Trade Executive Officer in October 2017. Italiana S.p.A., a subsidiary of the London Stock Exchange Solutions from 2012-2018, having previously held other senior Group. He is a Director of Intesa Sanpaolo S.p.A. He is also Vice roles since joining Citi in 2007. Dominic brings extensive financial management experience to the Board gained from a number of senior finance roles in President of Bocconi University, Italy, where he was Rector Prior to joining Citi, Ruth worked for the European Banking international businesses together with general operational from 2012 to 2016 and where he is currently also a Professor Federation from 2003-2007 as a Policy Adviser for Securities management experience. Dominic is a chartered accountant. of Banking and Finance. Services and Payments. Prior to that, she worked at the Commerzbank Real Estate Fund and was also a trainee in the Relevant past experience: Dominic was formerly a NED and European Commission. Chair of the Audit, Risk and Compliance Committee of Shire plc Ruth has held a number of industry board and working group from 2014 to 2018 and Chief Financial Officer of Iglo Foods Group positions in the UK, Europe and globally. Limited from 2010 to 2011. Before joining Iglo, Dominic was European Finance & Strategy Director at Cadbury plc from 2008 Other current appointments: Ruth is a NED of Permanent to 2010 having previous held senior finance roles at that TSB Group Holdings PLC. She is a Partner at Gauss Ventures company. Prior to his role at Cadbury plc, Dominic was a Director and a strategic adviser of the ETPPA, a European trade body at Pricewaterhouse Coopers LLP. in the payments space. Ruth is also a Visiting Professor of the London Institute of Banking and Finance and a fellow Other current appointments: Dominic is also a member of the of CASS Business School. Council of University College London.

London Stock Exchange Group plc Annual Report 31 December 2019 77 Corporate governance

“Good governance is key to promoting the long-term sustainable success of the Company, generating value for shareholders, building and maintaining relationships with stakeholders and contributing to wider society.”

Don Robert Chair

Dear Shareholders, Committee Governance I am very pleased to present the Corporate Governance Report for the year ended Within this report and the Report on Directors’ Remuneration, the Chairs of the 31 December 2019. This report provides an overview of how LSEG is governed and Audit Committee, Nomination Committee, Remuneration Committee and Risk the control structures we have in place. The Board is responsible for the long-term Committee (Paul Heiden, me, Jacques Aigrain and Stephen O’Connor, sustainable success of the Company, generating value for shareholders and respectively) report personally on the activities of each of their committees contributing to wider society. The Board does this by supporting and challenging during the year. I would like to thank the Committee Chairs for the work they executive management to ensure we operate to high governance standards. This have done during the year. report explains how we seek to achieve this. It also contains some highlights from my perspective as Chair. Wider society An updated principle in the new Code provides that the Board has a role in 2019 is the first year that companies have been asked to report against the new ensuring that the Company is contributing to wider society. As described in the Corporate Governance Code (“the Code”). At the heart of the new Code is an Supporting Sustainable Growth section of the Strategic Report (pages 47–50), updated set of principles that emphasise the value of good corporate governance LSEG has many initiatives in place to deliver our vision to become the leading to long-term sustainable success. global financial infrastructure group, supporting global financial stability and sustainable economic growth by enabling businesses and economies to fund Board composition and appointments innovation, manage risk and create jobs. There have been changes to the Board’s composition during the year. The purpose of the changes is to ensure the replacement of key skills and experience Compliance with the UK Corporate Governance Code 2018 and to enhance the strength of the Board, also having regard to Board Diversity. (the “Code”) London Stock Exchange Group plc has followed all principles of the Code Following my appointment to the Board on 1 January 2019, I became Chair on throughout the financial year ended 31 December 2019 and to the date of 1 May 2019. Cressida Hogg joined the Board on 8 March 2019. In July 2019 we this report. The Company is also required to disclose whether it has complied announced that Dominic Blakemore would be joining the Board from 1 January with all provisions of the Code during the financial year. In the Directors’ 2020 and would replace Paul Heiden as Audit Committee Chair following the April Remuneration Report we explain the Company’s pension arrangements for 2020 AGM. Cressida and Dominic have both had extremely successful careers in existing Executive Directors and highlight that we have not yet complied in full executive and non-executive positions and the Board will look to draw on this with provision 38 of the Code relating to pensions. We explain on page 85 how experience in the coming years. Following the 2020 AGM Stephen O’Connor will we are transitioning to compliance with provision 38 of the Code, aligning become the Senior Independent Director. The work of the Nomination Committee executives to the workforce. For more detailed information on the Company’s is described on pages 88–89 of this report. pension arrangements for Executive Directors, please see page 107 of the Remuneration Report. Board effectiveness review This year’s results and agreed areas of focus for the Board are described on This report is intended to give shareholders a clear and comprehensive picture page 82. The Board will ensure that these focus areas are acted upon to further of the Group’s governance arrangements and how they operated during the improve Board performance. year. Pages 81–87 set out details of the areas of our focus during the year, followed by the Committee reports. Board site visits and Workforce Engagement Opportunities to visit our operations globally and learn more about the business Conclusion continue to be very important and valuable for the Board, and new members in I hope you find this report helpful and informative in understanding governance particular as they offer the opportunity for Directors to understand operations, at LSEG. I encourage all shareholders to vote their shares in favour of all performance and challenges in a regional context. Board members also get a resolutions to be considered at our AGM in April 2020, even if you are unable to chance to engage with the local workforce at different levels of seniority and from attend in person. This will allow us to gain a better understanding of the views of varying backgrounds. This aspect of Board visits provides real insight into the our shareholders. culture of the business. This year we also introduced more formal Board engagement with Employee forums. More information on the Board’s site visits Don Robert and workforce engagement can be found on page 80 of this report. Chair 28 February 2020

London Stock Exchange Group plc 78 Annual Report 31 December 2019 Governance Corporate governance

Board responsibilities In carrying out the duties of the LSEG Board, the Directors act in accordance with The LSEG Board is collectively responsible for the long-term, sustainable success all relevant and applicable legislative and regulatory rules. In particular, they take of the Company and generating value for its shareholders and contributing to into account Directors’ duties contained in the Companies Act 2006 (the “Act”) wider society. and will consider the factors listed in section 172 of the Act and any other relevant factors. The Board: ––Provides leadership of the Company within a framework of prudent and LSEG’s Section 172(1) statement for the year ended 31 December 2019, including effective controls which enables risk to be assessed and managed illustrations of Board decisions taken during the year, can be found on page 52 of the Strategic Report as required by law. ––Sets the Company’s purpose, values and strategic aims and satisfies itself that these and its culture are aligned Our Committees ––Ensures necessary resources are in place for the Group to be able to meet its The Board has delegated to its Committees responsibility for maintaining objectives and measures performance against these, this includes the effective governance in relation to: Audit, Nomination, Remuneration and Risk. establishment of a framework of prudent and effective controls, which enable Full details of the Committees’ responsibilities are detailed within the respective risk to be assessed and managed Committee reports on pages 88–128. ––Reviews financial and business performance Board and Standing Committee meetings 2019 ––Leads the development of the Company’s culture, values and behaviours The Board held 11 Board meetings of which six were scheduled meetings and five were additional meetings. A table of attendance at Board and standing ––Ensures that its responsibilities to shareholders and stakeholders are met, Committee meetings is set out below. through effective engagement. This includes having workforce policies and practices that are consistent with the Company’s values and support the Company’s long-term sustainable success

The table shows the number of meetings attended against the number of meetings each Director was eligible to attend.

Name of Director Board Audit Nomination Remuneration Risk Don Robert1 10/11 4/4 4/4 Jacques Aigrain2 10/11 5/5 2/2 6/6 Marshall Bailey 11/11 4/4 6/6 Professor Kathleen DeRose3 10/11 4/4 2/2 4/4 Paul Heiden 9/11 5/5 3/4 2/3 6/6 Cressida Hogg4 9/9 2/2 3/3 Raffaele Jerusalmi 11/11 Stephen O’Connor5 10/11 3/5 4/4 5/6 Dr Val Rahmani6 11/11 2/2 5/6 6/6 David Schwimmer 11/11 Professor Andrea Sironi 11/11 4/4 6/6 Dr Ruth Wandhöfer7 11/11 4/5 2/2 6/6 David Warren 11/11 Directors who left during the year Sir Donald Brydon CBE 3/3 1/1 2/2 1. Don Robert was unable to join the additional Board Meeting held in January shortly after he joined the Board due to a previous diary commitment scheduled before he joined the Board. The Board was notified in advance of this commitment 2. Jacques Aigrain was unable to join to the additional Board meeting held in July. The additional meeting was scheduled on short notice for a day when he had already committed to be at another Board meeting 3. Professor Kathleen DeRose was unable to join the additional Board meeting held in September, relating to the unsolicited proposal from HKEX scheduled on short notice, due to a previous commitment relating to her teaching role 4. Cressida Hogg was appointed to the Board on 8 March 2019 5. Stephen O’Connor was unable to attend scheduled meetings of the Board and Risk Committee in April and July because of bereavements 6. Dr Rahmani was unable to join the additional Remuneration Committee meeting held in July relating to the Refinitiv transaction. The additional committee meeting was scheduled on short notice for a day when she had already committed to be at another Board meeting 7. Dr Ruth Wandhöfer was unable to join one Audit Committee meeting due to previous diary commitments scheduled prior to her joining the Board. The Board was notified in advance of these commitments

Attendance at Board Meetings These attendances are not recorded in the above table. The Board believes these When Directors have not been able to attend meetings, they received and assist in developing understanding of all issues by the Directors. reviewed the relevant meeting papers. Where they had comments or concerns on the matters to be discussed, they provided these to the Chair of the Board or The Board also met without the presence of the Chair and throughout the year, Committee in advance of the meeting. The Chair of the Board engages with the Chair met with Non-Executive Directors individually. Directors between Board meetings to discuss business and strategic issues. Comprehensive Board and Committee papers, comprising an agenda and formal When arranging meetings at short notice, every attempt is made to reports and briefing papers are sent to Directors in advance of each meeting. accommodate Directors’ diaries; however, inevitably, not all Directors are able to Directors are continually updated with written and verbal reports, from senior attend all such meetings. The majority of meetings where Directors have been executives and external advisors. unable to attend were additional meetings. Some Directors also attended Committee Meetings where they were not members of the relevant Committee. London Stock Exchange Group plc Annual Report 31 December 2019 79 Corporate governance (continued)

Stakeholder Engagement ––Employee surveys: the Board receives the results of the annual “Have Your The Board seeks to understand the views of shareholders and other key Say” staff survey. The survey enables employees to share their views on what it stakeholders: customers; regulators; and the workforce. is like to work for LSEG and it provides management and the Board with insight into employees’ views on a number of topics as well as way to track the level of For more information on how we engage with our stakeholders as well as how the engagement within the organisation. In 2019, 84% of the organisation Board has discharged its duties under Section 172 of the Companies Act, please participated in the survey, the highest level to date; and see pages 51–52 of the Strategic Report. ––Culture dashboard: the Board regularly reviews a culture dashboard throughout the year. The dashboard tracks metrics around: recruitment and Workforce Engagement onboarding, performance and development, talent and mobility, diversity and During the year the Board has sought to increase its direct engagement with inclusion and leavers, allowing the Board to measure and assess culture to a wide cross section of the workforce to better understand their perspective ensure full alignment to the Group’s values and behaviours and assess progress on the business. over time. Board Engagement with the Employee Forum Further information During 2019 members of the Board met with employee forums as part of a new More information on workforce engagement can be found in the section Employee Board consultation initiative. These forums are comprised of headed “Complying with the Provisions of the Code” of this Corporate employees from a cross section of business and corporate areas, as well as Governance Report and in the section headed “Our People” in the Supporting representatives from the Colleague Forum, Works Council and our “Have Your Sustainable Growth section of the Strategic Report on pages 43–46. Say” and “You Matter” engagement working groups. An agenda and questions for the representatives to consider were provided in advance. Topics where the Board Board Independence asked for views included culture, leadership, remuneration as well as the The Board has concluded that all Non-Executive Directors are independent in proposed acquisition of Refinitiv. Forum members sought feedback in advance character and judgement. In assessing each Director, the Board considers from colleagues on these areas as well as any other matters colleagues wished to whether there are relationships or circumstances which are likely to affect or raise. These consultations provide the Board with new opportunities to seek the could appear to affect a Director’s judgement. views of colleagues across the Group and respond to this feedback. Feedback received from colleagues who attended the sessions included that the Refinitiv In evaluating Directors’ independence, the Board has taken into consideration acquisition was viewed as positive for the Group. There was acknowledgement in the guidance provided by the Code including the requirement for a Company these sessions that there was a lot of work that needed to be done ahead of to state its reasons that a Director has served on the Board for more than nine completing the acquisition and colleagues made some suggestions about years from the date of their first election. Paul Heiden has served on the Board communications to employees. This feedback has been incorporated into the since June 2010 and will be retiring from the Board following the 2020 AGM. Group’s internal communications strategy for 2020. Verbal and written summaries of the discussions are provided to the Board. Although Mr Heiden had served more than nine years on the Board, the Board considered that Mr Heiden was independent in character and judgement. The Employees who attend these forums also produced a blog for the Group’s intranet Board considers that an individual’s independence cannot be determined solely site, Bond, to increase awareness of the engagement process across the organisation. on the basis of a particular period of service. The Board continues to benefit from Paul’s experience and knowledge resulting from the length of service, particularly Other ways in which the Board has engaged with the workforce in Q1 as he transitions his Audit Committee responsibilities across to Dominic The Board has also engaged with the workforce and sought to understand their Blakemore. More information around the Board’s succession planning process can views through a range of other mechanisms including: be found in the Report of the Nomination Committee at pages 88–89. ––Overseas visits: as part of its ongoing development the Board visits the In line with the Code all Directors are subject to annual re-election. Group’s overseas sites and/or receives presentations from these businesses. In 2019, it visited the Group’s businesses in Italy, and met with employees in Matters considered by the Board Milan. During its visit to Milan, the Board spent a day receiving updates on key Each of the regular meetings includes a wide-ranging report from the Chief business and strategic initiatives from employees in our Milan office. The Board Executive Officer and a report from the Chief Financial Officer on the Group’s also spent a day receiving presentations from employees from its Paris office; financial performance. Reports from the Committee Chairs, updates on ––Board breakfasts: breakfast meetings with employees at director and major projects and certain administrative matters are also reported at each managing director level on the morning of Board meetings. These meetings are Board meeting. attended by all NEDs. Feedback received from these breakfast sessions is then fed back to the Board as a whole, typically at the Board meeting that takes A table of the principal matters considered by the Board during the year is place immediately after these sessions; provided on the next page.

London Stock Exchange Group plc 80 Annual Report 31 December 2019 Governance Corporate governance

How the Board spent its time during the year

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Strategy and Implementation LSEG CEO Report l l l l l l LSEG CFO Report l l l l l l 2020 Strategic Objectives l M&A Update l LSEG Strategy l l l Refinitiv Transaction l l l l Acquisition of stake in Euroclear l HKEX unsolicited approach l

Report from Committee Chairs Audit l l l l l Nomination l l l l Remuneration l l l l l l Risk l l l l l

Financial reporting and dividends Annual Report l Final Dividend and Interim Dividend l l Preliminary Results and Interim Results l l Quarterly Trading Statement l l Intercompany financing arrangements l 2020 Budget and Business Plan l Shareholder Circular l

Business Unit Updates Business Spotlight – UnaVista l Italian business update l French business update l

Risk, regulatory and compliance Brexit Contingency planning l l l Risk Report and Risk Appetite l l Cyber Security Update and “Deep Dive” l l l

Governance and stakeholders Share Issuance and Hedging approach l Notice of AGM l Authorisation of Directors’ Interests l Directors’ Independence l LSEG Share Dealing Policy l LSEG Data Policy Framework l Renewal of Director Appointments l l Board Effectiveness (Internal Review) l

ESG Matters Workforce Engagement Update l l l Modern Slavery Statement l LSEG Culture Dashboard (including Diversity and Inclusion) l l l Corporate Sustainability Report l

London Stock Exchange Group plc Annual Report 31 December 2019 81 Corporate governance (continued)

Board Governance Day The Board identified that the key areas for Board focus were: In 2019, the Group held a “Governance Day” for Non-Executive Directors from LSEG and certain of its key subsidiaries. This included presentations from all the Group’s Board composition — to continue to consider the appropriate size of the divisional leaders and leaders from corporate functions such as Risk, Investor Board and balance of skills, in particular, as a result of the Refinitiv transaction; Relations and Government Relations and Regulation. Feedback received from NEDs indicated that they thought the day had been beneficial and improved their Stakeholder engagement — to continue to seek improvements in knowledge and understanding of the Group and of its shareholders and other stakeholder engagement; stakeholders. During 2020, the Board will look at other opportunities for NEDs from across the Group to engage on common themes and topics of interest. Technology — to continue to find ways of improving the Board’s ability to oversee and provide effective challenge on technological opportunities and Board Effectiveness and Leadership threats; and

2019 Effectiveness Review Refinitiv integration — to continue to oversee preparations for integrating A Board Effectiveness Review is carried out annually. Every three years this is with Refinitiv. externally facilitated. In 2019, the Board carried out an internal review of its own effectiveness and that of its Committees and Directors. The evaluation process The Committee reviews undertaken were positive about the management and was conducted by the Group Company Secretary using a detailed questionnaire composition of the committees as well as the quality of the information received. provided by an external provider, Lintstock. Lintstock also collated and Areas for focus (by Committee) are summarised in the table below. summarised the Directors’ responses into a report for the Board. As part of the process, the Senior Independent Director led a separate meeting without the Committee 2020 Area of Focus presence of the Chair to discuss the Chair’s performance. The Chair also met Audit ––Training to be provided on new accounting with Directors individually to discuss their performance. Lintstock do not have standards and impact of CCPs on the balance sheet and income statement. any additional connection with LSEG. Nomination Committee ––Planning for integration of three new Board members post Refinitiv closing. The results of the review will be used to assist the Board in the future ––Continued focus on structure of executive development of the Board, its Committees and its individual Directors. succession planning. Remuneration Committee ––Ensuring that comparable market data remains appropriate as the Group grows in size. Risk Committee ––Closer examination of some of the Principal Risks

2018 Effectiveness Review The 2018 Effectiveness Review identified a number of areas on which the Board considered focus would be needed in 2019. These are summarised below, together with the resulting actions taken in 2019. Area Description Summary of actions identified and taken

Knowledge of the business for all Board members wanted to increase ––A number of Director briefing sessions focused on different areas of the Directors and training for new Directors their knowledge and understanding of business were held in 2019 including: the Group, particularly as a number of •• cyber security; new Directors joined the Board in 2018. •• Information Services Division; •• ForexClear; •• the Group’s French businesses; and •• the Group’s Italian businesses. ––A “Business Spotlight” item was added to the Board agenda ––The Group held a “Governance Day” for NEDs from LSEG and certain of its key subsidiaries. This included presentations from all the Group’s divisions and leaders.

Rotation of Non-Executive Directors 2018 was an unusual year with three Four Nomination Committee meetings were held in 2019 including consideration of NEDs leaving and five Directors NED (and Executive) succession. A successor for Chair of the Audit Committee was appointed and the Board wished identified and an additional Non-Executive Director was appointed. to see further focus on NED succession planning.

London Stock Exchange Group plc 82 Annual Report 31 December 2019 Governance Corporate governance

Relations with shareholders Conflicts of interest We believe that regular and ongoing engagement with our key stakeholders and, The Company’s Articles of Association allow the Board to authorise conflicts of in particular, our shareholders is extremely important for good corporate interest that may arise and to impose such limits or conditions as it thinks fit. governance. The Group’s Investor Relations (IR) function, reporting to the Chief The Group has established procedures whereby actual and potential conflicts of Financial Officer, manages a shareholder engagement programme throughout interest are regularly reviewed, appropriate authorisation is sought prior to the the year. Executive management and the IR team engage with investors through appointment of any new Director and new conflicts are addressed appropriately. meetings, conference calls and presentations to discuss strategy, performance and other matters. The decision to authorise a conflict of interest can only be made by non-conflicted Directors and, in making such decisions, the Directors must act in a way they The Chair, Senior Independent Director and Chairs of each Board Committee are consider, in good faith, would be most likely to promote the Company’s success. also available to meet major investors, typically to discuss corporate governance matters. In 2019, senior executive management and the IR team met with over Indemnities 550 institutional debt and equity investors through one-to-one and group Directors have the benefit of indemnity arrangements from the Company in meetings or calls across the UK, North America and Europe. Senior executive respect of liabilities incurred as a result of their office and execution of their management and the IR team also participate at institutional investor powers, duties and responsibilities. The Company maintained a Directors’ and conferences hosted by banks or industry organisations as a further channel to Officers’ liability insurance policy throughout the year. This policy covers the meet existing or prospective investors, often presenting or taking part in Directors for any such liabilities in respect of which they are not indemnified by discussion panels. the Company and, to the extent to which it has indemnified the Directors, also covers the Company. This insurance cover has been renewed. Neither the In addition, the Chair met with major shareholders in order to understand their Company’s indemnity nor insurance provides cover for a Director in the event views on governance and performance against the Company’s strategy. The that the Director is proved to have acted fraudulently or dishonestly. Chair of the Remuneration Committee also directly consulted with a number of shareholders on remuneration matters. Risk Management and Internal Control The Board is responsible for the Group’s risk management framework and The Board receives a report on IR matters at each of its scheduled meetings, maintaining an appropriate system of internal controls. A Board approved including feedback from investors, market expectations of financial performance Enterprise Risk Management Framework and Group Risk Appetite Statement are and updates on share register composition. Sell-side analyst research notes are central to the Group’s Risk Management process. The Risk Management Framework circulated to the Board following publication. The Group’s corporate brokers and a is updated on an ongoing basis in response to changes in the Group’s business and specialist IR advisory firm also provide the Board with advice on market associated risks. The Group Risk Appetite statement is approved annually. sentiment, input on market communications and share register analysis. The Audit Committee and Risk Committee assist the Board in discharging its In 2019, the Group conducted an extensive shareholder engagement programme responsibilities by reviewing and assessing the Group’s Risk Management in relation to the proposed acquisition of Refinitiv to explain the rationale for the Framework, system of internal controls and risk management process on a transaction and address any questions. Further follow up took place post the regular basis. Refer to the reports of the Audit Committee on pages 90–95 publication of the shareholder circular in relation to the transaction towards the and the Risk Committee on pages 96–97 for further detail on their oversight end of 2019. Senior executive management also met with shareholders in activities during the year. response to the unsolicited approach by Hong Kong Exchanges and Clearing Limited. The Group continues to respond to ad-hoc meeting requests by The system of internal controls is designed to facilitate the management of the shareholders and potential new investors throughout the year. Group and its businesses within the Board’s risk appetite rather than eliminate the risk of failure to achieve the Group’s objectives, and can only provide In addition to information on financial and operational performance, the Group reasonable, but not absolute, assurance against material misstatement or loss, engages with shareholders and relevant shareholder advisory agencies on fraud or breaches of laws and regulations. environmental, social and governance (ESG) matters. The Group produces an annual Corporate Sustainability report that details its approach to ESG matters: Executive management is accountable for risk identification, evaluation, www.lseg.com/about-london-stock-exchange-group/corporate- mitigation, monitoring and reporting in accordance with the framework. A sustainability. divisional internal control and Risk Management self-certification process is also performed semi-annually. Each business unit is required to confirm that it The Group’s AGM provides the opportunity for all shareholders to meet and to put is in compliance with the Group’s policies and governance procedures and questions to the Board Directors. Procedures for the AGM (and any General managing its risk within appetite: exceptions are reported to the Audit Meeting) are compliant with the Code, with voting by way of a poll to ensure all Committee and Risk Committee. shareholders’ views are taken into account. The Board also met with shareholders in November 2019 at the General Meeting to approve the Refinitiv transaction. Further detail on the Group’s risk management oversight can be found on: www.lseg.com/about-london-stock-exchange-group/risk-management- The IR section of the Group’s website (www.lseg.com/investor-relations) is a oversight. primary source of regularly updated information about the Group. All financial reports and statements, news releases, presentations and other documents An overview of the Principal Risks and Uncertainties (including details of emerging including regulatory news service disclosures are available on the website risks) of the Group is provided on pages 60–73. together with a list of analysts producing research on the Company and a summary of analysts’ forecasts of performance. Recognising that joining our preliminary and interim results calls is not always possible recordings of these calls are accessible to all shareholders via the Group website.

London Stock Exchange Group plc Annual Report 31 December 2019 83 Corporate governance (continued)

Internal Controls Internal Audit Management structure The Internal Audit function provides reasonable independent assurance to the The Group operates a matrix structure designed to optimise resource allocation Board and other key stakeholders over the adequacy and effectiveness of the and organisational capacity. The Board has delegated the day-to-day running of Group’s system of internal controls, the governance model and the Enterprise- the Group to the Group Chief Executive Officer and he is supported in this role by wide Risk Management Framework. The function is the third line of defence in the Group Executive Committee, which he chairs. Each Executive Committee the Group’s risk control structure and has no operational responsibilities over the member is responsible for one of the Group’s operating divisions or a major area entities or processes which it reviews. of strategic importance. The Executive Committee meets regularly to review business and financial performance, risk exposure and to approve key decisions. The independence of the Internal Audit function from Executive Management is Each legal entity is responsible for engaging with its local regulators and ensured through the following measures: monitoring and ensuring regulatory compliance. ––The Group Head of Internal Audit reports directly to the Chair of the Audit Policies and Procedures Committee and has direct access to the Chair of the Board. For administrative A framework of Group-wide policies establishes the principles, minimum matters the Group Head of Internal Audit has a secondary reporting line to the standards and risk management activities LSEG requires the Group’s businesses Chief Financial Officer and functions to follow to manage their business within risk appetite. All ––The Chair of the Audit Committee and Chief Financial Officer jointly assess the Group-level policies are approved by the Executive Committee and may also performance of the Group Head of Internal Audit require approval or ratification from the Audit Committee, the Risk Committee and the Board. ––The Audit Committee approves the Internal Audit annual budget

The Group runs a rolling programme of mandatory online training courses for all Further details on the Internal Audit function can be found in the internal audit employees covering matters including ethical conduct, risk and control charter which is available on the Group’s website at www.lseg.com/about- management, regulatory requirements and the Group policies. london-stock-exchange-group/corporate-sustainability/governance.

Financial Control Conclusion The Group has a robust system of financial control and an appropriate framework The Board confirms that, through the Audit and Risk Committees, it has reviewed of delegated authorities is in place. the operation and effectiveness of the Group’s system of internal controls throughout 2019 and up to the date of approval of this Annual Report and Comprehensive financial planning, reporting and review procedures are in place, Accounts. The Board has satisfied itself that a robust assessment of the principal with an annual budget and three-year business plan approved by the Board. risks facing the Company, including those that would threaten its business Financial and key performance indicators are reviewed against operational model, future performance and liquidity, have been carried out during the year. budgets on a monthly basis at a Group, divisional and business unit level. The Necessary actions have been or are being taken to remedy any significant Chief Financial Officer’s management reports are shared with the Board and any failings or weaknesses identified during these reviews. The Board is satisfied that key issues are reviewed at each Board meeting. the Risk Management process and system of internal controls conform with the FRC’s 2014 Risk management, internal control and related financial and business The Executive Committee monitors capital expenditure across the Group and reporting. approves and prioritises projects supported by divisional and functional investment committees and portfolio boards. Further information Further detail on the Group’s risk management oversight can be found on: The Treasury Committee operates within a Board approved policy framework www.lseg.com/about-london-stock-exchange-group and meets regularly to review the management of the Group’s credit, market /risk-management-oversight. and liquidity risks. Material Group counterparty exposures are assessed regularly including through a Group-wide centralised counterparty risk Value An overview of the Principal Risks and Uncertainties (including a summary at Risk model. Further details on financial risk management are provided in of emerging risks) of the Group is provided on pages 60–73. Note 3 to the accounts.

London Stock Exchange Group plc 84 Annual Report 31 December 2019 Governance Complying with the Complying with provisions of the Code provisions of the Code

The Group is committed to high standards of corporate governance of a culture dashboard tracking metrics around: recruitment and onboarding, and business integrity in all its activities. Throughout the financial performance and development, talent and mobility, diversity and inclusion and year ended 31 December 2019 and to the date of this report, London leavers, allowing the Board to measure and assess culture to ensure full Stock Exchange Group plc has followed all principles of the Code. alignment to the Group’s values and behaviours and assess progress over time. The Company is also required to disclose whether it has complied The Board also reviewed the results of the latest employee engagement survey with all the provisions of the Code during the financial year. In the “Have Your Say” at its December Board meeting. More information on the Directors’ Remuneration Report we explain the Company’s pension Company’s culture and programme of work around workforce engagement arrangements for existing Executive Directors and highlight that we undertaken during the year can be found in section D and on pages 43–46 of the have not yet complied in full with provision 38 of the Code relating to Strategic Report. pensions. Under the Company’s revised Remuneration policy that will be presented to the Company’s shareholders for approval at the 2020 C. Resources and Control Framework AGM in April, pension contributions for new Executive Directors will be The Board sets the strategic aims of the Group and ensures necessary resources limited going forwards to 10% of salary, which is below the UK are in place to meet its obligations and reviews financial and business workforce average of 11% of salary. Additionally, the current CEO’s performance. It discharges its responsibilities by overseeing the execution of the pension contribution will be reduced from 15% to 10%, effective April Group’s strategy holding executive management to account for its delivery. 2020. It is not intended to amend the contribution for the CFO who has The Board approves the Group’s annual operating and capital expenditure stated his intention to retire from the Company by the end of 2020, or budgets, business plans and any material changes to them. The Board has the CEO of Borsa Italiana, who accrues mandatory state pension oversight of the Group’s operations ensuring: competent and prudent benefits in Italy. management is in place, sound planning is undertaken, an effective risk management framework has been established, an adequate system of internal For more detailed information on the Company’s pension arrangements for control is maintained, adequate accounting and other records are kept and Executive Directors, please see page 107 of the Remuneration Report. In all other compliance with statutory and regulatory obligations respects, the Company has complied with the provisions of the Code during the financial year ended 31 December 2019. D. Engagement with Shareholders and Stakeholders Shareholders The Code is publicly available at the website of the UK Financial Reporting Council The Company maintains an active shareholder engagement programme, at www.frc.org.uk. This corporate governance section of the Annual Report and managed through the Group’s IR function. The IR programme provides regular Accounts describes how we have applied the principles of the Code including its opportunity for executive management contact with existing and potential detailed provisions. shareholders. In addition to shareholder meetings, with executive management the Chair met with major shareholders in order to understand their views on The Code sets out guidance in the form of main principles and more detailed governance and performance against the Company’s strategy. The Chair of the provisions for good governance in relation to: Board Leadership and Company Remuneration Committee also consulted with a number of shareholders on Purpose, Division of Responsibilities, Composition, Succession and Evaluation, remuneration matters. For further information on the Group’s Investor Relations Audit, Risk and Internal Control and Remuneration. This table forms part of the activities please see page 83 of this Corporate Governance Report. Corporate Governance Statement on page 129 of the Directors’ Report. Other Stakeholders The Board views customers, regulators and the workforce as key stakeholders. 1. Board Leadership and Company Purpose Members of the Board have engaged directly with stakeholders and the Board also A. Role of the Board receives indirect feedback via management reporting to the Board. Please see The Board is the principal decision-making forum for the Group and is page 51 of the Strategic report for further information about stakeholder responsible for achieving the Group’s strategic objectives and delivering engagement. During the year the Board looked at additional ways it could engage sustainable growth. Directors act in a way they consider will promote the with the LSEG workforce and Board consultations with employee forums have long-term success of the Company, by constructively challenging and been established alongside other more informal consultation methods (see page supporting the development of the Group’s strategy, for the benefit of 80 of this Governance Report). These consultations provide the Board with new shareholders as a whole, having regard to the interests of the workforce, the opportunities to seek the views of colleagues across the Group and respond to impact of the business on the community and environment, the interests of this feedback. other stakeholders including the Company’s suppliers and contributing to wider society. The Board manages the overall control of the Group’s affairs with E. Workforce policies and practices reference to the formal schedule of matters reserved for the Board. This schedule The Board reviews the Group’s key policies on a periodic basis, ensuring that is available on the Company’s website at: www.lseg.com/about-london-stock- such policies are consistent with the Company’s values, supporting long-term exchange-group/corporate-sustainability/governance. sustainable success. The Board has delegated authority to the Audit Committee to routinely review the adequacy and security of the Group’s arrangements for B. Purpose, Values and Strategy its workforce to raise concerns, in confidence, about possible wrongdoing in The Group’s purpose is to support global financial stability and sustainable financial reporting or other matters (the “Whistleblowing Policy”). In 2018, economic growth by enabling businesses and economies to fund innovation, a “Speak Up” campaign was conducted across the Group to increase the manage risk and create jobs. More information on the Company’s purpose, workforce’s awareness about the Group’s Whistleblowing Policy, the Audit values and strategy can be found on pages 21–23 of the Strategic Report. The Committee and the Board receives periodic updates in relation to this. Board supports and promotes a culture based on our core values of Partnership, Integrity, Innovation and Excellence. The Board receives periodic updates from management on matters relating to culture. This includes regular presentation

London Stock Exchange Group plc Annual Report 31 December 2019 85 Complying with the provisions of the Code (continued)

2. Division of Responsibilities Section 3: Composition, Succession and Evaluation F. Division of Responsibilities J. Board appointments The roles of the Chair and the Chief Executive Officer are distinct and separate The Nomination Committee is responsible for monitoring the balance of skills, with a clear division of responsibilities. The Chair leads the Board and is knowledge and experience, and diversity of Board, making recommendations to responsible for its overall effectiveness as well as promoting a culture of openness the Board of new appointments to the Board and overseeing executive and debate. The Chair takes the lead in the development of the Group’s culture by succession planning. Appointments to the Board are subject to a formal, rigorous the Board and providing an environment in which the Directors can discharge and transparent procedure. An effective succession plan is maintained for the their duties effectively and in compliance with the law. He is responsible for Board and senior management. Both appointments and succession plans are setting the tone of the Company consistent with the high standards of behaviour based on merit and objective criteria. The Company uses external search demanded of the workforce. He performs representative duties on behalf of the consultancies when looking to make appointments to Board positions. More Group with a wide range of stakeholders including governments and regulators. information on the appointment of Directors can be found in the Report of the The Board should appoint a Senior Independent Director and Paul Heiden was Nomination Committee on pages 88–89. the Senior Independent Director during the year. Stephen O’Connor will become the Senior Independent Director following the AGM in April 2020. K. Board skills, experience and knowledge A full description of the responsibilities of the Chair and Chief Executive Officer The Board is comprised of an appropriate combination of Executive and (as well as the Senior Independent Director) is available on the Company’s Non-Executive Directors who have an appropriate combination of skills, website: www.lseg.com/about-london-stock-exchange-group/corporate- experience and knowledge. The Non-Executive Directors provide deep corporate sustainability/governance. experience and knowledge which they apply to their understanding of the Group, its purpose, values and strategy. The Board has delegated to its Committees G. Board Composition responsibility for maintaining effective governance in relation to: Audit, The Board is comprised of an appropriate combination of Executive and Nomination, Remuneration and Risk. The Chair of the Company (who was Non-Executive Directors. There is a strong non-executive element on the Board independent on appointment), chairs the Nomination Committee and is a with 10 independent Non-Executive Directors (nine following the 2020 AGM) and member of the Remuneration Committee. Full details of the Committees’ a Chair who was independent on appointment. The Board has three Executive responsibilities are detailed within the respective Committee reports on pages Directors. Non-Executive Directors are responsible for scrutinising and holding to 82–128. The Nomination Committee considers the length of service of the Board account the performance of management and individual Executive Directors as a whole and the membership and more information on matters considered by against agreed performance objectives. the Committee during the year can be found in the Report of the Nomination Committee at pages 88–89. H. Board responsibilities and time commitment The other significant appointments of the Board are set out on pages 75–77. L. Annual Board Effectiveness Review The Board is satisfied that these do not conflict with their duties and time. The Board undertakes an annual Board Effectiveness review. As part of this The Board has established procedures for the approval of additional review the Board and the Committees consider a wide range of matters including appointments of Board Directors. composition, diversity and how effectively Board members work together. As part of the 2019 review, the Senior Independent Director led a separate meeting The following significant appointments were approved during the year. without the presence of the Chair to discuss the Chair’s performance. The Chair Approval of each appointment was only made after consideration of existing also met with Directors individually to discuss their performance. More detail on appointments of each Director and a review of potential conflicts including an the 2019 review and the progress made against the actions identified from the independent review by the Group compliance function taking into account the 2018 review can be found on page 82. time commitments of the new roles and the ability of each Director to remain committed to their role on the Board. Taking account of these factors it was considered appropriate to approve the appointments:

––Kathleen DeRose’s appointment as a Non-Executive Director of Voya Financial, Inc ––Andrea Sironi’s appointment as a Non-Executive Director of Intesa SanPaolo S.p.A. The Company has robust procedures around the recording of interests and, under the Company’s Conflicts of Interest Policy, the appropriate level of discretion, to take mitigating actions, where required.

I. Board support The Directors have full access to the advice and services of the Group Company Secretary, who is responsible for advising the Board on corporate governance matters. Directors also have access to independent professional advice if they judge it necessary to fulfil their responsibilities as Directors. The appointment and removal of the Company Secretary is a matter for the whole Board.

London Stock Exchange Group plc 86 Annual Report 31 December 2019 Governance Complying with provisions of the Code

Section 4: Audit, Risk and Internal Control Section 5: Remuneration M. Role of the Audit Committee in ensuring independence and P. Remuneration policies and practices effectiveness of financial controls The Remuneration Committee is responsible for determining and implementing The Audit Committee is responsible for monitoring of the integrity of the Group’s the Remuneration Policy for the Group, including setting the remuneration of the financial reporting including the effectiveness of the Group’s internal control and Chair, Executive Directors and senior management. The Committee also oversees risk management systems and for monitoring the effectiveness and objectivity the arrangements for the wider workforce. Executive remuneration is aligned of internal and external auditors. The Board receives regular updates from the with the Company’s purpose and values and linked to the delivery of the chair of the Audit Committee at every Board meeting and between meetings, Company’s long-term strategy and culture. The remuneration of Non-Executive where requested. The Audit Committee report on pages 90–95 sets out details of Directors is determined by the Board and reflects the time commitment and composition of the Committee including the expertise of members, and at least responsibilities of the role. Remuneration for Non-Executive Directors does not one member of the Committee has recent and relevant financial experience. The include share options or other performance related elements. The Report of the report also outlines how the Committee has discharged its responsibilities during Remuneration Committee can be found at pages 98–128. The Committee’s 2019 including: the review undertaken by the Committee of the annual and half Terms of Reference can be accessed on the Company’s website: yearly reports, the effectiveness of the Group’s internal control and risk www.lseg.com/about-london-stock-exchange-group/corporate- management systems and the monitoring of relevant Company’s policies and sustainability/governance. procedures. The Committee’s Terms of Reference can be accessed on the Company’s website: www.lseg.com/about-london-stock-exchange-group/ Q. Development of Remuneration policy corporate-sustainability/governance. The Company has a formal and transparent procedure for developing policy on executive remuneration. In determining the policy, the Remuneration N. Fair, balanced and understandable reporting Committee takes into account a range of factors including: clarity, simplicity, The Audit Committee reviews the content of the Company’s annual report and risk, predictability, proportionality and alignment to culture. No Director is accounts and advises the Board on whether, taken as a whole, it is fair, balanced involved in setting their own remuneration outcome. Details of the Remuneration and understandable providing the information necessary for shareholders to Policy and its implementation can be found in the Report of the Remuneration access the Company’s performance, business model and strategy. Committee (pages 103–128).

O. Risk management and oversight R. Remuneration outcomes The Risk Committee is responsible for providing leadership, direction and Directors exercise independent judgement and discretion when authorising oversight of the Group’s overall risk appetite, risk tolerance and strategy. The remuneration outcomes, taking account of company and individual Committee advises the Board on the current and future risk exposures of the performance and wider circumstances. Group (including emerging risks) and carries out a robust assessment of the Company’s emerging and principal risks. It reviews and approves the Group’s risk management framework, monitoring its effectiveness and adherence to various risk policies. The responsibility and authority of the Committee covers the whole of the Group’s businesses. Where there is a perceived overlap of responsibilities between the Audit and Risk Committees, the respective committee chairmen will have the discretion to agree the most appropriate committee to fulfil any obligation. The reports of the Audit and Risk Committees can be found on pages 90–97 of this Report. The Committee’s Terms of Reference can be accessed on the Company’s website: www.lseg.com/about-london-stock-exchange- group/corporate-sustainability/governance.

London Stock Exchange Group plc Annual Report 31 December 2019 87 Report of the Nomination Committee

Board Succession Planning and Board Appointments During the year, the Committee reviewed the structure, size and composition of the Board and its Committees, to ensure critical skills and experience were refreshed. In carrying out its review the Committee took account of recent and likely future Board changes, Board expertise, diversity and tenure to help it identify Board succession requirements. A skills-map was used to help identify skills gaps and to support the Committee’s recommendations to the Board.

Don Robert Board Appointments Chair Appointments to the Board are subject to a formal, rigorous and transparent Nomination Committee procedure described below: Process for Board appointments On behalf of the Board I am pleased to present the report of the When making Board appointments, the Committee reviews and approves an Nomination Committee for the year ended 31 December 2019. outline brief and role specification, and appoints an external search consultancy for the assignment. Board composition and succession planning for Non-Executive Directors and identifying a new Audit Committee Chair were key areas The Committee meets with the external search consultancy to discuss the of focus for the Committee. The Committee also reviewed succession specification and search as well as the Group’s need for diversity. The external plans for senior management. search consultancy prepares an initial long list of candidates from which the Committee produces a shortlist. Interviews are held with the Chair, Group CEO and This report describes the work of the Committee. a selection of Non-Executive Directors as well as in some cases the Group CFO. 2019 Priorities The Committee makes a recommendation to the Board for its consideration. The four priorities set by the Committee at the start of the year are Following Board approval, the appointment is announced in line with summarised below: requirements of the FCA’s Listing Rules. In due course, a tailored induction programme is developed for the new director. 1. Reviewing Board composition and succession planning in light of the number of changes to the Board in 2018 and future changes Appointment of a new Audit Committee Chair 2. Identifying a new Audit Committee Chair The Board announced on 21 November 2018 that Paul Heiden would resume the role of Audit Committee Chair (following the departure of the previous Committee 3. Reviewing Senior Management succession plans including in particular in Chair) but that a search would be commenced for a successor. The Committee relation to the enlarged Group’s needs following the Refinitiv transaction developed a role description with key experience requirements including that the 4. The need for a continued focus on inclusion and diversity (including candidate be a serving executive with experience as a CFO who ideally would gender and ethnic diversity) have previously chaired an Audit Committee at a large or listed company. Dominic Blakemore was appointed as a Non-Executive Director on 1 January Committee Membership 2020. He will become Chair of the Audit Committee at the end of the AGM on During the year, the Committee’s membership was extended to include all 21 April 2020. The Board considers that Dominic met all of the key experience Non-Executive Directors to enable them to be able to participate in discussions requirements and the role description criteria. Dominic brings deep financial and relating to Board composition and succession planning. The names and commercial expertise to the Board, gained from his current role as CEO of biographies of the Non-Executive Directors who sit on this Committee can be Compass and also from previous roles as CFO of Compass, Birds Eye and found on pages 75–77 of this report. Cadbury. He also has experience of chairing an Audit Committee having chaired the Shire plc Audit, Risk and Compliance Committee between 2014 and 2017. The Group Company Secretary is the Secretary to the Committee and attends all As the Group seeks to integrate the Refinitiv business the Board will benefit from meetings. The Group Chief Executive Officer, Head of Human Resources and his strong experience in managing international businesses as well M&A, change external advisers attend where requested by the Committee. management and risk.

Committee Purpose and Responsibilities Other Board Appointments The Nomination Committee is responsible for monitoring the balance of skills, Cressida Hogg was appointed as a Non-Executive Director of the Company during knowledge and experience as well as the diversity of the Board. It is also the year. The criteria for this appointment included experience as a FTSE 100 responsible for making recommendations of new appointments to the Board and director as well as the need for continued focus on inclusion and diversity of the overseeing Board and senior management succession planning. The Committee’s Board (including gender and ethnic diversity). Cressida chairs FTSE 100 company Terms of Reference can be found on the Company’s website: www.lseg.com/ Land Securities Group plc, having been a Non-Executive Director since 2014. She about-london-stock-exchange-group/corporate-sustainability/governance. has also sat on the Board of Associated British Ports Holdings Limited (from 2015 to 2018) and Anglian Water Group Limited (from 2007 to 2018). She spent nearly The Committee met four times during the year, and in addition, Committee 20 years at 3i Group Plc, becoming Managing Partner in 2009, where she gained members also met with director candidates. I am pleased to confirm that a deep understanding of large, long-term infrastructure projects and businesses these efforts have resulted in the Committee’s priorities being met, as as well as considerable experience of investment returns, management and described in this report. leadership. Cressida was also Global Head of Infrastructure at Canada Pension Plan Investment Board (from 2014 to 2018).

London Stock Exchange Group plc 88 Annual Report 31 December 2019 Governance Report of the Nomination Committee

Board Committees The Board supports the proposals of the Hampton-Alexander Review to achieve The Board also refreshed membership of each of its Committees during the year. 33% female representation by the end of 2020. The 2019 Hampton-Alexander The following changes were made during 2019: Report recognised that the Company had made significant improvements in female representation on the Board, rising 47 places to 50th position in the FTSE Audit and Risk Committees Kathleen DeRose was appointed to both Committees. Following his 100 rankings with women comprising 30.8% of the Board. During 2019, the appointment to the Board on 1 January Board’s gender diversity increased with the appointment of one additional 2020, Dominic Blakemore also female Non-Executive Director, Cressida Hogg, taking the number of female became a member of the Audit and Board directors to 4 out of 13. The Board currently has 4 female directors out of Risk Committees 14 although this will fall back to 4 out of a total of 13 following the AGM in April Nomination Committee In order to ensure all Non-Executive 2020 after the transition period for the Audit Committee Chair. Directors are able to participate in discussions relating to succession planning and Board composition, The Board supports the recommendations of the Parker Review on Ethnic all Non-Executive Directors were Diversity and recognises it has more work to do in terms of increasing the appointed to the Nomination ethnic diversity of the Board. Committee Remuneration Committee Paul Heiden stepped down from the In 2016, the Group’s Executive Committee formed the Diversity and Inclusion Remuneration Committee and Cressida (D&I) committee. The D&I Committee is chaired by the Group Chief Risk Officer Hogg was appointed to the Committee and is comprised of Divisional Business Heads and senior leaders. Gender is one key focus of our diversity agenda and the Committee oversees the Group’s Senior Management Succession Planning investment in developing diversity including our female talent and succession During the year, the Committee (with the Group Chief Executive Officer) reviewed pipeline. Members of the Executive Committee and line managers have D&I the detailed succession plans prepared for the Group’s Executive Committee as measures built into their performance objectives and these form an important well as other key senior management roles. The Committee also received element of their performance review. Diversity is integral to our LSEG Culture information to allow it to track progress against gender diversity targets. A number Dashboard and this data is regularly reviewed by our Executive Committee and of internal and external appointments were made to the Executive Committee Board to track progress and act as necessary. More information on the throughout the year and these are described in the CEO’s statement. The names Committee’s key initiatives to support diversity can be found in the supporting and biographies of the members of the Group Executive Committee can be found sustainable growth section of this report on pages 43–46. on pages 24–25 of this report. Review of information on gender diversity forms part of the Committee’s review of Senior Management succession planning. All appointments and succession plans are based on merit and objective criteria and the Company uses external search consultancies when making Group Chief Financial Officer appointments to key positions. These firms are required to provide a diverse In October 2019, David Warren, Group Chief Financial Officer, informed the list of candidates for senior roles. In particular, the Board’s succession and Company of his intention to retire and step down from the Board and the Group appointment approach aims to secure balanced shortlists for new appointments. Executive Committee by the end of 2020. He will continue in his current role as Group Chief Financial Officer and a member of the Board through to the close of Gender Balance in senior management and their direct reports the Refinitiv transaction to ensure a smooth transition to his successor. The The Group was an early signatory of HM Treasury’s Women in Finance Charter Committee commenced a global search for his successor supported by external in the UK, and we set ourselves a stretch target of reaching 40% female search consultancy, Odgers Berndston. representation in our senior leadership (Executive Committee plus two levels) population by 2020. Board Effectiveness The results of the 2018 Board Effectiveness Review are described on page 82. Female representation amongst LSEG’s most senior management population Succession planning for Non-Executive Directors was previously identified as a (Executive Committee and their immediate direct reports) stands at 29%. key focus for the Board in 2019 and this is reflected in the actions taken by the The table below summarises the progress made since 2018 for this population. Nomination Committee during 2019. This year’s results and agreed areas of focus 31 December 2019 31 December 2018 for the Board are described on page 82. The Board will ensure that these focus Female 25 (29%) 19 23% areas are acted on to further improve Board performance. Male 60 (71%) 63 77%

Diversity and Inclusion We continue to make progress at all levels within the organisation and you can The Board’s membership reflects a wide range of skills and business experience, read more about this in the section titled Supporting Sustainable Growth on drawn from a number of industries, which is critical for bringing both the pages 43–46 of this report. expertise required and to enable different perspectives to be brought to Board discussions. The combination of these factors means that the Board benefits from Board appointments: Use of External Search Consultancies a diverse range of competencies, perspectives and thoughts, providing an ability External search consultancy Inzito supported the Board on the appointments to challenge on strategic issues and a dynamic environment for decision making. of Dominic Blakemore and Cressida Hogg. Odgers Berndston is supporting the Board in the search for a Chief Financial Officer.

Inzito does not have any additional connection with LSEG. Odgers Berndston also provides general recruitment services to London Stock Exchange Group.

Don Robert Chair 28 February 2020

London Stock Exchange Group plc Annual Report 31 December 2019 89 Report of the Audit Committee

––Reviewed the effectiveness of the external auditor based on their qualifications, expertise, resources, level of independence, execution of their audit plan and the quality of their conclusions and recommendations. On the basis of their own interaction with EY and that of management, the Audit Committee confirmed that the services provided by EY were appropriate and in compliance with relevant auditor independence and integrity rules

––Received and discussed a report from Executives on the cyber security programme Paul Heiden Chair of the ––Discussed a number of internal audit reports during the year and satisfied itself Audit Committee that management action plans were in place to address the recommended improvements within reasonable deadlines The Audit Committee members as at 31 December 2019 were: Paul Heiden (Senior Independent Director), Jacques Aigrain, Dr Ruth ––Approved the 2020 internal audit universe, internal audit plan, internal audit Wandhöfer, Stephen O’Connor and Professor Kathleen DeRose. We risk appetite and budget and resources for the Internal Audit function. The believe that the Committee, as a whole, continues to have competence Committee also approved the updated internal audit charter and continued to relevant to the sector in which the Group operates. The Committee’s review alternatives to improve the coordination of all assurance functions effectiveness was assessed as part of the 2019 board effectiveness internal review. The evaluation process was conducted by the Group ––Discussed the impact on the Group’s financial accounts of the acquisition of Company Secretary using a detailed questionnaire provided by an Beyond Ratings, a Paris based provider of sovereign sustainability assessments external provider. More details on the Committee’s effectiveness and of minority investments in Euroclear and Nivaura review can be found in the “Corporate Governance” section of this report on page 82. ––Continued to monitor the alignment of the control environment of recent acquisitions with the Group internal control framework. It satisfied itself that This report is intended to give an overview of the role and activities these acquisitions were being integrated according to plan and were meeting of the Audit Committee in assisting the Board to fulfil its oversight the financial objectives of the Group. Where gaps were identified, the responsibilities relating to the monitoring of the effectiveness of the Committee requested remediation plans to be put in place system of internal control and risk management, the independence and effectiveness of the external auditor and the integrity of the ––Discussed the quality of earnings in relation to the Group’s Adjusted Group’s financial statements. It details the activities, discussions Operating Profit (AOP) and decisions that enabled the Audit Committee to fulfil its responsibilities effectively during 2019. ––Discussed the Group’s position regarding the decision by the EU that the UK had breached EU state aid rules with regard to its Controlled Foreign Companies During the year, as part of its key priorities, the Committee: (CFC) rules ––Discussed the proposed acquisition of Refinitiv extensively, reviewed the information produced by the various external parties involved in the due ––Discussed the accounting treatment of IFRS 15 for London Stock Exchange diligence efforts and approved the financial information included in the admission fees. Approved the new data model to calculate the average life of shareholder circular published 6 November 2019 listing on the exchanges and the impact on the Group’s financial accounts

––Reviewed and discussed the Group’s formal response to the Kingman Review of ––Approved a parent guarantee from the Group for a selection of direct and the Financial Reporting Council (FRC) and the creation of the Audit, Reporting indirect subsidiaries in order to obtain audit exemption for the subsidiaries and Governance Authority (ARGA) and the response to the Independent Review under section 479A-479C of the Companies Act 2006 into the Quality and Effectiveness of Audit chaired by Sir Donald Brydon ––Continued to closely monitor the effectiveness and independence of the ––Received and discussed the external audit management letter from EY LLP. enhanced whistleblowing arrangements of the Group including a review of the The letter highlighted areas for improvement, in particular regarding the sales status and resolution of the whistleblowing reports received during the year cycle management in the Information Services Division These were noted by the Committee for follow-up

London Stock Exchange Group plc 90 Annual Report 31 December 2019 Governance Report of the Audit Committee

Priorities in the forthcoming year will include: Role and responsibilities of the Audit Committee ––Continuing to closely monitor the progress of the proposed acquisition of 1. Financial reporting Refinitiv and in particular the changes in financial projections and synergies for The Committee recommends the financial statements of the Group to the Board, the combined group resulting from potential actions from regulatory and including the annual and half-yearly reports, preliminary results announcements antitrust reviews and any other formal announcement relating to its financial performance, reviewing the significant financial reporting judgements that they contain. ––Overseeing the completion of the Refinitiv transaction and ensuring that the transaction is accurately represented in the financial accounts and the annual 2. Internal controls and Risk Management systems report of the combined Group The Committee keeps under review the effectiveness of the Group’s system ––Receiving assurance that the control environment remains robust to support of Internal Control and Risk Management. The Audit Committee makes the continued growth and diversification of the Group’s activities, including recommendations to the Board regarding the effectiveness of the Group’s all major projects, as well as key processes such as resiliency and cyber Internal Control and Risk Management systems and recommends to the Board security programmes the statements to be included in the Annual Report concerning internal controls and Risk Management (in collaboration with the Risk Committee). The Committee ––Monitoring the progress of the alignment of assurance activities across also monitors and reviews the effectiveness of the Group’s Internal Audit function, the internal audit, risk and compliance functions and third party assurance ensuring that it has adequate resources and appropriate access to information to providers perform its function independently from executive management. ––Monitoring the progress of the integration of newly acquired businesses 3. External auditor ––Monitoring the progress of management actions recommended within The Committee oversees the relationship with the external auditor. The the external audit management letter from EY Committee reviews and approves the annual audit plan, ensures that it is ––Receiving early and continuous understanding of the impact of the Group’s consistent with the Committee’s view of the scope of the audit engagement and acquisitions and divestitures on financial and tax accounting reviews the findings of the audit with the external auditor. The Committee monitors and reviews the objectivity and independence of the external auditors ––Continuing to assess the impact of developments in accounting standards including the non-audit activities performed by the auditors for the Group (see ––Continuing to monitor progress on the key IT and infrastructure projects the external auditors fees section below for more details). The Committee ensures of the Group that the external audit services contract is put out to tender on a periodic basis in line with existing best practices and regulation (the current external auditor was Paul Heiden appointed in 2014 following a tender process overseen by the Audit Committee). Chair of the Audit Committee The Committee oversees the selection process for new auditors and if an auditor 28 February 2020 resigns the Committee investigates the issues leading to this and decides whether any action is required.

4. Other matters Whistleblowing and fraud The Committee reviews the Group’s arrangements for its employees to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters. The Committee ensures that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action. The Committee also reviews annually the Group’s procedures for detecting fraud and for the prevention of bribery.

London Stock Exchange Group plc Annual Report 31 December 2019 91 Report of the Audit Committee (continued)

Composition and meetings Internal controls: The Committee meets the requirements of the Code. Dominic Blakemore joined The Committee continued to exercise disciplined oversight of the effectiveness the Committee on 1 January 2020 and the Committee now comprises six of the Group’s internal controls throughout the year. It fulfilled its responsibilities independent Non-Executive Directors. It is chaired by Paul Heiden who is a by reviewing and discussing regular reports from the external auditor, the qualified chartered accountant with a career in a variety of senior finance roles. Internal Audit and Risk Management functions as well as from external Following the Group’s AGM in April 2020, Paul Heiden will step down from the experts, including: LSEG Board and he will be succeeded as Chair of the Committee by Dominic ––Reports on compliance with the Code – internal controls (including Blakemore (see page 77 of this report for Dominic’s biography). The skills and whistleblowing) at half year and year end experience of each Committee member are provided in the Board of Directors section on pages 75–77. ––Quarterly updates on internal audit plans including internal control issues raised and management actions to remedy the deficiencies The Chief Financial Officer, Group Financial Controller, Group Head of Internal ––Annual report on the performance of the Internal Audit function at the first Audit, Group Chief Risk Officer and the external auditor are standing invitees Audit Committee of the year to all Audit Committee meetings. In addition, various other members of management are invited from time to time to present specific matters relevant The Committee obtained additional comfort by meeting with the Group Head to the Committee’s remit. The Chair of the Board also attends the Committee of Internal Audit at each Audit Committee meeting without executive on a regular basis. management present. Further details on the functions and responsibilities of the Audit Committee can The activities of the Committee related to internal controls enabled it to satisfy be found in the Committee’s Terms of Reference (dated 1 January 2019) which itself that the Internal Audit function is independent, objective and adequately are reviewed annually and available from the Group Company Secretary or in the staffed to perform its duties. In addition, the Committee assessed the corporate governance section of the Group’s website at: www.lseg.com/ effectiveness of the Internal Audit function throughout the year using qualitative about-london-stock-exchange-group/corporate-responsibility/ and quantitative indicators including: governance. ––Completeness of the audit universe and the audit plan Activities in 2019 ––Quality of the methodology (updated at least once a year) The Committee met five times during the year. The Committee maintains a formal agenda which ensures that all matters for which the Committee is ––Quality of the audit reports and the issues raised responsible are considered at the appropriate meeting. The agenda for each ––Consistency of the audit issues raised and their ratings meeting was determined by the key events of the annual financial reporting cycle, the risks identified by the Committee and the standing items under its ––Feedback from executive management on specific audits Terms of Reference. The following provides details on how the Committee ––Key performance indicators such as percentage of the audit plan completed, discharged its responsibilities during the year as set out in its Terms of Reference: duration of audits, distribution of audit ratings, percentage of past due actions and percentage of self-identified issues Financial matters: With regards to financial matters, the Committee reviewed, discussed and The Committee relied on the assurance process throughout the year to approved the half-year and full-year financial results. It reviewed, discussed recommend to the full Board that it could report to shareholders on the and approved key accounting judgements, the annual review for goodwill effectiveness of the Group’s internal control system. The Board statement impairment and assessment of indicators of impairment on purchased intangible can be found on page 84. assets, management’s view of commitments and contingencies and the adequacy of the proposed disclosures. For more details on the main discussions and decisions reached by the Committee on financial matters, see the section below entitled ‘Significant matters impacting the financial statements’ and ‘Other topics of discussion in respect to the financial statements’.

London Stock Exchange Group plc 92 Annual Report 31 December 2019 Governance Report of the Audit Committee

Oversight of the external auditor: A breakdown of audit and non-audit service fees paid and payable to the external The Committee assessed the effectiveness of the external audit process auditor for the year ended 31 December 2019 and prior year is provided below including the independence and quality of the Group’s external auditor (EY) and in Note 36 to the financial statements. throughout the year. The Committee relied on its own judgement supported Year ended Year ended by the following evidence: 31 December 31 December 2019 2018 ––The Committee received a report from management on their own evaluation of £m £m the effectiveness of the external auditor Services Audit of parent and consolidated financial ––It received reports from EY on the status of their 2019 plan and the results statements 1 1 of their work. The external auditor’s reports were discussed at each Audit of subsidiary companies 3 2 Committee meeting and their views and opinions used to challenge decisions by Group Finance Non-audit services 1 1 Total 5 4 ––Evidence of matters referred for specialist review, technical review, and Note: EY LLP provided non-audit services of £0.4m; 8% of total fees (2018: £0.6m; 15% of total fees). quality control This comprised of audit related assurance services of £0.3m (2018: £0.5m) and other non-audit services of £0.1m (2018: £0.1m). ––The Committee also held separate meetings with EY at each Committee meeting without management being present. The Committee reviewed each of these individual appointments on their merits. Prior to EY being engaged, the review process involved considering management’s Based on all evidence presented, the Audit Committee satisfied itself that the assessment of: external audit has been conducted independently and effectively with the appropriate rigor and level of testing. ––The threats to independence and objectivity resulting from the provision of such services Having considered the performance of EY for the past five years, the Audit ––Which accounting firms had the appropriate experience and expertise to Committee recommended to the Board in 2019 that a resolution for the undertake the work reappointment of EY as the Company’s external auditor for the year ending 31 December 2020 be proposed to shareholders at the AGM in April 2020. ––Whether there were any conflicts of interest for EY ––Whether the conflicts of interest that existed for other potential firms, who were EY were appointed as our external auditors in 2014. The Group intends to put the either advising other parties to the transactions or were auditors of the other external audit out to tender every 10 years and no later than 2023. The lead audit company, could be appropriately managed partner and other key partners identified are required to rotate every five years. Other partners are required to rotate every seven years. Maurice McCormick took ––The quantum of non-audit fees in the context of the overall audit fee and relative over as lead audit partner in 2018. The Committee approved the EY audit plan, significance to EY in the context of its total client fees the methodology used, the scope of the audit by location, the risks and areas of focus as well as the materiality threshold for the Group and the threshold for In each case, the Audit Committee concluded, on the balance of risks, that the reporting unadjusted audit differences. The Committee has complied with the appointment of EY to perform certain non-audit services represented the most relevant parts of the Competition and Markets Authority Final Order on the effective, secure and efficient way of obtaining the necessary advice and services, statutory audit market for the year ended 31 December 2019. given their knowledge of our business and the Group’s structure and accounting and tax affairs, together with their wider knowledge of our industry sector. Report on external auditor’s fees and safeguards on non-audit services The Committee has a formal policy governing the engagement of the auditors to Other matters: provide non-audit services which is reviewed on an annual basis. As part of its regular annual activities, the Committee assessed its own effectiveness. See page 82 for further detail. This policy prohibits certain activities from being undertaken by the auditors such as: accounting/bookkeeping services, internal auditing, certain tax and payroll services, executive recruitment and remuneration services and more generally any work where a mutuality of interest could compromise the independence of the auditors. The policy also places restrictions on the employment of former employees of the auditors. Recognising however that the auditors are best placed to undertake certain work of a non-audit nature, the policy permits the provision of audit-related services and permitted non-audit services with the prior approval of the Committee.

London Stock Exchange Group plc Annual Report 31 December 2019 93 Report of the Audit Committee (continued)

Significant matters impacting the financial statements Other topics of discussion in respect to the financial statements: Acquisition of Beyond Ratings Significant matters How the Committee reviewed for January – these matters and what On 3 June 2019, LSEG announced the acquisition of Beyond Ratings. The Audit December 2019 decisions were taken Committee reviewed the accounting entries of the transaction to satisfy itself that the impact of the transaction was appropriately reflected in the Group accounts. Revenue recognition The Audit Committee reviewed the external auditors’ comments on the recognition of revenues in the secondary capital markets trading area, fees or Quality of earnings revenue share clearing arrangements and the The Audit Committee discussed the quality and profile of the Group’s earnings revenue accruals for FTSE Russell (see EY audit across all its businesses in relation to the Adjusted Operating Profit (AOP) opinion on page 137). The Audit Committee was measure. The two main topics were the accounting of net investment hedges satisfied that sufficient analysis had been performed in this area to demonstrate that there and the application of the IFRS 15 accounting standard. The Committee satisfied was no evidence that any manipulation of itself that the appropriate accounting entries were reflected in the AOP measure. revenues had taken place.

Capitalisation and The activity of the Group in relation to the internal IFRS 15 treatment for admission and listing services fees impairment of development of software has expanded significantly The Audit Committee discussed the clarification guidance from the IFRS internally developed over time. The capitalisation of software Interpretations Committee (IFRIC) regarding the impact of adopting IFRS 15 software development expenses involves management on admission and listing services provided by the Capital Markets Primary judgment against criteria set out in IFRS. Where indicators of impairment are identified or where an Markets business. The IFRIC recommended that a stock exchange’s admission asset has not been brought into use, a full fees should be deferred under IFRS 15 and recognised as revenue in the income impairment assessment is performed at the statement over the period in which the Group provides the listing services. reporting date. The Audit Committee reviewed the The Audit Committee satisfied itself that it understood the implications of methodology used by Group Finance to capitalise software development expenses and satisfied itself IFRS 15 on the Group’s financial statements. that it was adequate and in conformity with IFRS. The Audit Committee also considered possible EU State Aid challenge indicators of impairment for the significant The Audit Committee continues to discuss the petition by the Group of the EU internally developed software and came to the conclusion that no impairment should be recorded. General Court to annul the EU Commission’s findings that the UK had breached EU State Aid rules with regards to its CFC exemption known as the Finance Debtors The Audit Committee reviewed the trade receivables Company Partial Exemption (FCPE). Following the Groups’ information profiles of the Group (mostly FTSE and LSE businesses) submission to HMRC, which includes its view that it expects to have no exposure, and concluded along with management that the ageing of receivables continued to improve. The Audit HMRC have issued a determination, as required by EU law regardless of the Committee also satisfied itself that the carrying value appeal process, focusing on one of the Group’s two potentially exposed of trade debtors was accounted for correctly. subsidiaries for 2015 only, for the amount of £1.2 million. Valuation of goodwill The Audit Committee considered the approach and and acquired methodology applied to performing the detailed The Group made payment to HMRC for the determination, as required by the intangibles impairment annual goodwill impairment assessment as well as recovery process in January 2020 but did so having submitted an appeal to assessment the assessment for indicators of impairment of other HMRC against the determination. The Group recognised a receivable for the purchased intangible assets as required under IAS 36, including the key assumptions for short and determination to reflect management assessment of no exposure. It is likely that long-term growth rates, cash flow expectations and all taxpayers’ appeals against the determinations will be stayed by HMRC until the discount rates used for the Group’s cost of the resolution of the appeals to the EU general court by both the UK government capital as well as key business indicators. The and affected taxpayers. The exposure range to the Group remains between £0 impairment review was also an area of focus for the external auditors, who reported their findings to the and £65 million. However, considering the appeals made by the UK PLCs Committee. Details of the impairment review can be (including the Group), UK Government and management’s internal view, the found in Note 14 to the financial statements on Group does not consider any provision is required in relation to this investigation. pages 173–175.

London Stock Exchange Group plc 94 Annual Report 31 December 2019 Governance Report of the Audit Committee

Commitments and contingencies Fair, balanced and understandable Annual Report The Audit Committee considered the facts and circumstances surrounding The Audit Committee satisfied itself that the Annual Report is fair, balanced and commitments and contingencies for the Group. The Committee agreed that no understandable and has presented its conclusions to the Board. In order to reach provision is needed to be recorded in the financial statements. See Note 28 to its conclusions, the Committee examined the following criteria: the financial statements on page 194. ––Fair: Non-underlying items •• The Annual Report does not omit important or sensitive elements necessary The Committee discussed and agreed on the classification of non-underlying to understand the strategy, performance and business model of the Group items in the financial statements for the year. In particular, the Audit Committee discussed the nature and amounts of the provisions to be made for the •• Segmental reporting accurately describes the various activities of the Group ongoing cost restructuring programme and the fees linked to the proposed and their relative contributions to the strategy, performance and business acquisition of Refinitiv. model of the Group •• The messages in the Strategic Report and the CEO and Chair’s reports are The non-underlying items are presented in Note 8 to the financial statements consistent with the financial reporting section on page 169. ––Balanced: Financial viability statement •• There is an appropriate balance between the required statutory accounting In order to meet the requirements of the UK Corporate Governance Code, the metrics and Group-specific adjusted measures Board needs to explain how it has assessed the prospects of the Group taking into account the current position and principal risks, and over what period they •• The messages in all sections appropriately balance the favourable and less have done so along with why they consider that period to be appropriate. favourable events and trends affecting the strategy and performance of the Group The Audit Committee discussed the key elements required to make the •• The principal risks presented in the Strategic Report on pages 60–73 statement, i.e.: accurately reflect the risk registers which are used to set the risk appetite and ––Deciding on the appropriate period to cover the strategy of the Group, including those risks which would threaten its business model, future performance, solvency and liquidity ––Identifying and describing the relevant evidence and assumptions and ensuring that the various planning scenarios were realistic, taking into account ––Understandable: the business, industry and macroeconomic factors •• There is a clear and comprehensive framework for the Annual Report ––Making an assessment that is appropriate to the Company’s circumstances •• The key messages are adequately highlighted in simple language avoiding ––Applying appropriate stress testing and reverse stress testing specialised terms and acronyms wherever possible •• There is a glossary of technical terms and acronyms used frequently across The Audit Committee satisfied itself that the Board of Directors was in a position to the report make the statement using the Group Stress testing methodology. The Financial viability statement can be found within the Directors’ Report on page 132. •• The relevant information for shareholders is easy to find and appropriately cross-referenced where necessary without additional clutter (the 2019 Annual Report comprises 208 pages compared to the 180 pages of the 2018 report) •• The various sections taken together present a consistent and easy to comprehend overview of the strategy, performance and business model of the Group

London Stock Exchange Group plc Annual Report 31 December 2019 95 Report of the Risk Committee

The Committee closely monitored the continued implementation of the Group resilience strategy during the year including enhancements made to the cyber security framework and vendor management framework strategy. It also took into consideration the risks and opportunities related to the use of new technologies and of new operating models. The monitoring of the Group’s risk culture, which represents the foundation of the strong risk management capabilities within the Group, is considered at each meeting.

In order to avoid potential duplication of coverage and, more importantly, to Stephen O’Connor reduce the potential for non-coverage of important risk matters, by either the Chair of the Audit or the Risk Committees, there is a cross membership of both chairmen of Risk Committee the Audit and of the Risk Committees.

The Risk Committee members as at 31 December 2019 were Stephen Priorities in the forthcoming year will involve the monitoring of geopolitical risks, O’Connor (Chair), Professor Kathleen DeRose, Paul Heiden, Val Rahmani, cyber security and overall operational resilience, Environmental Social and Andrea Sironi and Dr Ruth Wandhöfer. Dr Stuart Lewis (Chief Risk Governance (ESG) risks, behaviour and culture throughout the Group and the Officer, Deutsche Bank AG) acts as a special adviser to the Committee monitoring and delivery of the Group’s Brexit plans as the UK defines its future and is a standing invitee to meetings of the Risk Committee. relationship with its key partners. The Committee will also monitor closely the level of readiness for managing the risks of an enlarged Group following the This report is intended to give an overview of the role of the Risk potential completion of the Refinitiv acquisition. Committee in assisting the Board to fulfil its oversight responsibilities relating to risk management and the adequacy of the systems of The Committee will continue to review, on a rotational basis, the risk profile and internal controls in place to mitigate key risks. execution risks of each of the Group’s main lines of business and key subsidiaries.

During the year ended 31 December 2019, the Committee met six times. The Committee will also continue to oversee the evolution of the Group’s risk In addition to its regular reviews of the Group’s risk profile, risk appetite, and culture across the Group and its subsidiaries to ensure the Board maintains emerging risks, the Committee focused on programmes to further strengthen highly effective risk management oversight and controls. the information security framework. The Committee also monitored specific operational incidents and resilience programmes in place. It also monitored the Stephen O’Connor Group’s transformation projects including M&A activities. Chairman of the Risk Committee 28 February 2020

London Stock Exchange Group plc 96 Annual Report 31 December 2019 Governance Report of the Risk Committee

Composition and responsibilities ––Review of the Treasury activities and adequacy of policy The Committee is chaired by Stephen O’Connor who provides extensive and ––Monitoring of the cyber security framework and enhancement programmes substantial financial and risk management experience developed during a career and approval of related policies in a variety of senior executive and non-executive roles in the financial services industry. In addition, the Board is satisfied that each member of the Committee ––Monitoring the delivery of actions to manage risks within risk appetite has the skills and experience necessary to enable the Committee to discharge its ––Reviewing and monitoring matters relating to operational resilience responsibilities effectively. The names, skills and experience of the members of the Risk Committee are provided on pages 75–77. ––Reviewing regulatory compliance reports and the actions in place to ensure ongoing compliance The Chief Financial Officer, the Chief Risk Officer and the Group Head of Internal ––Reviewing the adequacy and effectiveness of the systems of the internal Audit are standing invitees to all Risk Committee meetings. The Committee’s controls in place to manage key risks including the review of management’s terms of reference, which are approved by the Board and reviewed on an ongoing assessment of information security, financial crime, cyber-crime and data basis, are available from the Group Company Secretary or in the corporate management risks as well as management’s mitigating actions governance section of the Group’s website at www.lseg.com/about-london- stock-exchange-group/corporate-responsibility/governance. ––Ensuring the effectiveness of the Group’s Enterprise Risk Management Framework and of the Risk function The Committee maintains non-executive responsibility for high level risk-related ––Overseeing the adequacy of the counterparty limits and ad hoc counterparty matters and risk governance. As part of its mandate, the Committee reviews the credit risk analysis performed as required risk profile of the Group on a regular basis and comments on the adequacy of the processes in place to identify and report on key risks. It also reviews the risk ––Reviewing detailed reports of the risk profiles of the Group’s material profile of the major Group subsidiaries/divisions on an individual basis. It advises businesses the Board on the Company’s overall risk appetite, tolerance and strategy and ––Monitoring compliance with the Group risk management procedures as keeps under review the adequacy of the Enterprise Risk Management Framework described in the section on internal controls on page 83 and its use in the decision-making process, which includes the review of parameters used in the models and methodology adopted. It sets the standards ––Reviewing the adequacy of the Group’s Business Continuity Management for the accurate and timely reporting of key risks and risks of critical importance, plans and management programme such as risks relating to technology, cyber security, business continuity and ––Approving and recommending for approval key policies relating to risk and the disaster recovery, CCP operations, counterparty and reputational risks. It also terms of reference for the Risk Committee receives reports on compliance with relevant regulatory requirements for each regulated entity of the Group. ––Monitoring the Executive performance report on risk culture (awareness, transparency and accountability) which is also shared with the Activities Remuneration Committee The Committee maintains a formal agenda which ensures that all matters for ––Monitoring the roll out of the mandatory training programme on ethics, risks, which the Committee is responsible are considered at the appropriate meeting. controls and compliance During the year, the Committee discharged its responsibilities as set out in its terms of reference by: Risk Management function ––Providing robust reviews of principal risks The Risk Management function is headed by the Chief Risk Officer who oversees all aspects of risk management in the Group. She reports to the Chief Executive ––Monitoring strategy, planning and preparations for Brexit Officer and, for independence purposes, to the Chair of the Risk Committee. The ––Reviewing risk exposures of the Company and emerging risks, Committee approves the remit of the Risk Management function and ensures it including climate-related risks has adequate independence to perform its duty. The Committee must be consulted on the appointment or the dismissal of the Chief Risk Officer. ––Reviewing and recommending to the Board the Group Risk Appetite, including stress tests and challenging the scenario results ––Reviewing the Vendor Risk Management framework

London Stock Exchange Group plc Annual Report 31 December 2019 97 Directors’ Remuneration Report Statement by the Chair of the Remuneration Committee

Remuneration Policy Our Remuneration Policy was last subject to a binding shareholder vote at the 2017 AGM and was passed with 98.5% support. Overall, the Committee believes the policy is operating well and as intended. We are proposing a number of changes to the policy being put forward to shareholders for approval to ensure that our policy continues to align executive remuneration and shareholders’ long-term interests, adheres to evolving best practice and that our remuneration outcomes are appropriate in the context of the business model going forward. Jacques Aigrain Chair of the In formulating the revised policy, we undertook an extensive shareholder Remuneration consultation exercise with our major shareholders and investor bodies and are Committee grateful for the valuable feedback provided, which was generally very positive and supportive of the Committee’s approach. As part of the process, we consulted Remuneration Committee members (as at 31 December 2019) on the introduction of a post-employment shareholding requirement. The Jacques Aigrain (Chair) Committee’s initial proposal was to introduce a requirement for Executive Marshall Bailey Directors to hold 100% of their Minimum Shareholding Requirement (“MSR”) for Cressida Hogg the first year following departure and to hold 50% of their MSR for the second Don Robert year. However, further to feedback received during consultation, it has been Dr. Val Rahmani determined to strengthen this further such that Executive Directors will be required to hold up to 100% of their MSR for two years post-departure. On behalf of the Board, I am pleased to present the Directors’ Remuneration Report for the financial year ended 31 December 2019. The key policy and implementation changes are summarised below: Item Change This year’s disclosure is subject to two shareholder votes at our 2020 AGM: Pension alignment ––Pension contributions for new Executive Directors ––the Remuneration Policy Report (pages 104–113) is subject to a are limited to 10% of salary in line with the UK binding vote; and workforce average of 11% of salary. ––The incumbent CEO’s pension contribution will be ––our Annual Report on Remuneration (pages 114–128) is subject to reduced from 15% to 10% of salary, effective April an advisory vote. 2020. ––The Committee does not intend to amend the contribution for the CFO, who has stated his intention to retire from the company by the end of Context 2020, nor the CEO of Borsa Italiana, who accrues Our Remuneration Policy was last presented to shareholders for a vote in April mandatory state pension benefits in Italy. 2017 and as such, we are presenting a revised Remuneration Policy for Bonus deferral ––Mandatory bonus deferral into shares has shareholder approval at our 2020 AGM. During 2019 and early 2020 we continued been extended from 2 to 3 years for all to engage with shareholders and institutional investor bodies and undertook a Executive Directors. thorough review of our policy and performance measures, with shareholder LTIP ––Absolute TSR has been replaced by relative TSR. ––The weighting of performance measures has expectations, the proposed transformative transaction with Refinitiv and been adjusted from 50%:50% to 60% against corporate governance best practice in mind. Adjusted EPS performance and 40% against relative TSR performance. On 26 November 2019, shareholders voted almost unanimously in favour of the Malus and clawback ––The Committee’s ability to enforce malus and Refinitiv transaction, which is anticipated to close in the second half of 2020. The clawback has been enhanced in the event of a proposed transaction is a compelling opportunity to create a global financial ‘material failure of risk management’ for awards granted from 2020. markets infrastructure leader with significant multi-asset class capital markets ––This enhancement supplements previous capabilities, a leading data and analytics business and a broad post trade enhancements made in 2019 to strengthen offering, well positioned for future growth in an evolving landscape. the provisions in respect of individual conduct and behaviour. The Committee has developed a policy that is aligned to market practice, Post-employment ––A formal post-employment shareholding policy has shareholding requirement been introduced, requiring Executive Directors to corporate governance developments and which continues to promote the hold the lower of their actual shareholding and long-term success of the Group; both for LSEG as a standalone company and in 100% of their MSR for 2 years post-departure. the event that the transaction completes. NED shareholding ––A formal shareholding requirement has been requirement introduced for Non-Executive Directors of 1x basic annual fees to be built up within 3 years of appointment. NED travel allowance ––An intercontinental travel allowance has been introduced for Non-Executive Directors to reflect the global nature of the company’s business and the additional time commitment required for travel.

London Stock Exchange Group plc 98 Annual Report 31 December 2019 Governance Directors’ Remuneration Report

The Committee considered in detail the performance measures for the LTIP to This performance reflects strong growth in our FTSE Russell Indices and LCH OTC ensure they continue to provide strong alignment with our long-term strategy. clearing businesses, supported by a robust Capital Markets performance against Within our LTIP framework, we have replaced absolute TSR as a performance challenging market conditions. measure with relative TSR, in accordance with the market-standard approach and in response to shareholder feedback. ––Our Information Services Division’s revenue for FY2019 was £902 million (2018: £841 million), within which FTSE Russell Indices has continued An extensive review was carried out to determine the most suitable comparator to perform strongly with a 10% increase in revenue to £649 million group for the relative TSR measure and the Committee deemed the FTSE100 (2018: £592 million). index to be the most appropriate comparator sector at this time, as it provides a ––LCH’s income for FY2019 increased 14% to £756 million (2018: £662 million). broad range of firms across all sectors with a similar size and complexity to LSEG. SwapClear saw a 14% increase in clearing volumes, clearing a total US$1,229 Given current corporate activities at LSEG, our comparator group will be kept trillion (2018: US$1,077 trillion) for its members and their clients. under review to ensure that it remains appropriate for future awards. ––Income for Post Trade services in Italy increased 5% to £152 million The Committee has determined to increase the weighting of the Adjusted EPS (2018: £145 million). (“AEPS”) measure from 50% to 60%. AEPS growth targets have historically ––In our Capital Markets business, revenue increased 5% to £426 million challenged management to deliver stretching growth and placing a greater (2018: £407 million) and 109 new companies were admitted to our markets in emphasis on AEPS is deemed appropriate as it reflects a key focus of the the year, down 38% on 2018, reflecting challenging economic conditions. transaction; to deliver against ambitious growth and synergy targets. At 40% weighting, TSR remains a core component of our LTIP and combined with AEPS ––FY2019 revenue for the Technology Services division was £66 million ensures a balance of absolute and relative measures. (2018: £65 million).

The Committee will continue to review the LTIP measures, weightings and targets The Group produced these financial results as it executes its strategy to on an annual basis, to ensure their continued suitability and to ensure they are deliver best-in-class capabilities, drive global growth and develop our stretching both for LSEG as a standalone company and the combined business partnership approach. should the Refinitiv transaction complete. Bonus outcomes for Executive Directors Performance in the year As a result of the Group’s performance and individual contribution, the The Committee continues to place great importance on ensuring that there is a Committee determined that the Executive Directors will be awarded bonuses clear link between pay and performance, including a focus on culture, adherence of between 64% and 75% of their maximum opportunity. to the Group’s risk framework, and that our remuneration outcomes are reflective of this wider context. Application of discretion These outcomes are reflective of overall Group financial and strategic The Group has continued to execute our strategy against a continued uncertain performance, including a reduction in the overall rating of the strategic political and macroeconomic backdrop in 2019 and achieved a good financial deliverables assessment from 40% to 35% in recognition of the resiliency and performance while working closely with our customers to deliver new products technology issues in the Group in 2019. In addition, where the Committee have and services. LSEG announced the proposed acquisition of Refinitiv on 1 August deemed appropriate, formulaic bonus outcomes for certain individuals have 2019, which, if completed, will accelerate our strategy, while continuing to been adjusted. Further detail is shown on page 117. progress financially, strategically and operationally across our core businesses of Information Services, Post Trade and Capital Markets.

Total income from continuing operations rose to £2,314 million, up 8%. AOP increased by £134 million (14%) to £1,065 million while operating profit decreased by £13 million (2%) to £738 million.

London Stock Exchange Group plc Annual Report 31 December 2019 99 Directors’ Remuneration Report Statement by the Chair of the Remuneration Committee

Share plan vesting LTIP awards to be made in 2020 The LTIP awards made in 2016 vested at 89.6% overall during 2019. AEPS LTIP awards will be granted in 2020 under our 2014 shareholder-approved plan increased from 129.4p to 173.8p over the period to the end of December 2018, in line with our revised policy, subject to shareholder approval. resulting in 79.2% of the AEPS element vesting. TSR increased by 88% over the period to March 2019, resulting in 100% of the TSR element vesting. David Schwimmer will be granted a LTIP award of 300% in 2020, reflecting his importance to the Group and providing strong alignment to its performance. As shown in our ‘Single total figure of remuneration’ table, the AEPS element of Raffaele Jerusalmi will be granted a LTIP award of 200% of salary in 2020, in the LTIP awards made in 2017 will vest at 100%. Based on performance to date it recognition of his ongoing importance to Borsa Italiana in particular. No LTIP is forecast that the TSR element will vest in full, however this will be confirmed award will be granted to David Warren, who has stated his intention to retire from following the end of the performance period in March 2020 and will be disclosed the company by the end of 2020. in our FY2020 DRR. The achievement of stretching targets year on year has delivered significant value. These vesting outcomes reflect AEPS growth of 15.2% The Committee has given extensive consideration to the LTIP target ranges year on year and 15.6% compound annual growth rate (“CAGR”) over the 3 year applicable to the 2020 grant, in particular for AEPS growth, and sought the views performance period; and annualised TSR performance to date for these 2017 of shareholders and shareholder governance bodies during the year. grants is 37% p.a., incorporating share price growth of 88% in 2019. Further detail is provided in the Annual Report on Remuneration on page 120. Salary review for Executive Directors During the year, the Committee conducted its annual review of the base salary Operation of 2020 annual bonus levels of our Executive Directors. The operation of the 2020 annual bonus will continue to focus on financial targets, strategic initiatives and personal contribution. In line with our The Committee has decided to increase Mr Schwimmer’s base salary for his role commitment to ensure a greater focus on the development of the Group’s as CEO to £800,000. This increase, effective April 2020, is considered appropriate culture, an individual scorecard was implemented for the Executive Directors and in recognition of Mr Schwimmer’s performance and development since joining the Group Executive team for 2019 onwards. Within this scorecard a greater the Group as well as the scale, scope and responsibilities of his role. proportion is placed on assessing cultural objectives and behavioural performance, including 360° feedback, to allow for a stronger emphasis on how At the time of Mr Schwimmer’s appointment as CEO, the Committee set his base the individuals achieved their targets. This scorecard will be maintained in 2020. salary at a level below the previous incumbent to reflect that this was his first CEO role. Since joining, Mr Schwimmer has established himself successfully, For FY2020, the ‘strategic’ element will incorporate sustainability initiatives, demonstrating strong core leadership values and role-modelling the desired reflecting our commitment to ensure the long-term viability of the Group through culture and behaviours of the Group. Under his leadership, the Group has managing environmental and social impacts and practicing good governance. produced strong financial and strategic results and has grown to become a far larger business with a broader scope of products and services. Further detail is provided in the Annual Report on Remuneration on page 120.

The Committee has decided not to increase the salaries of Mr Warren, Chief Financial Officer or Mr Jerusalmi, Chief Executive Officer of Borsa Italiana and Director of Capital Markets.

Given the transformative nature of the proposed transaction with Refinitiv, the Committee will review the CEO’s salary upon completion in the context of the significantly larger, more international and complex business and the increased responsibilities and demands of the role.

Should the transaction complete, the combined business would be the largest publicly-listed financial markets infrastructure company by revenue globally and would offer significant customer benefits across the full range of LSEG’s businesses by: extending its trading capabilities across asset classes; expanding its data content, management and distribution capabilities; increasing its global footprint and range of customer offerings; and enabling LSEG, Refinitiv and their customers to benefit from future data and technology-enabled innovation and growth opportunities.

Any increase would be effective from 2021 and presented to shareholders in next year’s report.

London Stock Exchange Group plc 100 Annual Report 31 December 2019 Governance Directors’ Remuneration Report

Corporate governance developments In line with the new regulations, we have disclosed our CEO to employee pay ratio The Committee extensively reviewed the new principles of the UK Corporate on page 124. Paying our employees fairly relative to their role, skills, experience Governance Code. Although our existing policy is already substantially and performance is central to our approach to remuneration, and our reward compliant, in our enhanced policy the Committee has taken steps to further framework and policies support us in doing this. Equal pay is also critical, and we align to the requirements. review our pay levels on an ongoing basis to ensure that men and women are paid equally for doing equivalent work. Driven by our commitment to progressing The Code calls for Remuneration Committees to review wider workforce gender diversity globally, we have chosen to disclose our global gender pay remuneration and the alignment of incentives with culture. Executive figures from this year. Further information is provided in our Gender Pay Report remuneration in the context of the wider workforce and the link between the which is available at: www.lseg.com. Group’s culture with incentives are important considerations for the Committee and detail of how we consider these factors is included in the following section. During 2019, almost 600 employees across six countries benefited from Sharesave maturities including share price appreciation of 137%, reflecting the The Committee also reviewed the legislative changes requiring UK listed Group’s performance over the previous three years. Participation was extended companies to report on the ratio of CEO pay to the wider workforce and other further, with almost 1,100 employees joining the 2019 scheme, increasing overall miscellaneous reporting requirements in relation to the disclosure of Directors’ participation to over 59% of eligible employees. remuneration. The Committee welcome these developments and have adopted the requirements in this report. We are committed to fostering an inclusive environment for all our colleagues and believe everyone should be able to share in the success of the Group. In 2019, Wider workforce considerations we launched SharePurchase, a new all-employee share ownership scheme, to The Committee has responsibility for overseeing arrangements for all employees permanent employees in Australia and Romania, with 34% of eligible employees and reviews broader workforce policies and practices in order to support now participating. Sharesave has been offered in several countries for a number decisions on executive pay. Our Group-wide reward framework establishes the of years now; the introduction of SharePurchase ensures many more employees compensation structure, elements and leverage for each career stage in the around the globe have access to similar financial benefits that align to the organisation. This facilitates greater oversight of the Committee of remuneration Group’s future success. for the wider workforce.

Engagement with employees is an ongoing focus with a range of formal and informal channels available for colleagues to share ideas and concerns with members of the LSEG Board. Our Employee Board consultation process facilitates direct discussions between employee nominated representatives and members of our Board on executive remuneration and how it aligns with the wider company pay policy. In 2019, employee representatives provided feedback that colleagues do not have any concerns regarding the quantum of executive remuneration at LSEG. There is, however, an overall desire for more transparency on wider company pay. In response to this feedback, we have further developed our reward framework and are strengthening our communication and disclosure of this across the Group to enhance employee understanding.

Culture continues to be a key strategic focus and we place great importance on ensuring our pay policies and incentives support the desired culture and behaviours of the Group. The individual scorecard implemented in 2019 for our Group Executive team and Executive Directors provides the Committee with greater structure in determining the bonus of senior management as well as allowing for a greater focus on culture and behaviours. In addition, for the 2020 performance year, our bonus deferral scheme will be extended below Group Executive level to the Managing Director population. This reinforces the alignment of the pay of senior management with shareholder interests and the Group’s long-term performance.

London Stock Exchange Group plc Annual Report 31 December 2019 101 Directors’ Remuneration Report Statement by the Chair of the Remuneration Committee

Summary of key executive remuneration decisions

Executive Director, CEO of Borsa Italiana & Director Role Chief Executive Officer Chief Financial Officer of Capital Markets Name David Schwimmer David Warren Raffaele Jerusalmi Previous salary (with effect from 1 April 2019) £775,000 £500,000 €525,000 Annual salary (with effect from 1 April 2020) £800,000 (+3%) £500,000 (+0%) €525,000 (+0%) Bonus for financial year % of salary 169% of salary 146% of salary 128% of salary ending 31 December 2019 % of maximum 75% 73% 64% £ total amount £1,310,000 £732,000 €670,0003 Of which 50% is deferred1 £655,000 £366,000 €335,000 Max. bonus opportunity (% of salary) 225% 200% 200% Sterling equivalent of 200% of salary (€1,050,000) LTIP award (subject 300% of salary 0% of salary (at prevailing rate at to performance) (£2,400,000) (£0)2 time of grant) 1. Executive Directors must compulsorily defer 50% of bonus into shares for a period of two years under the outgoing policy except the CEO who, under the terms of his appointment, must defer for a period of 3 years. For performance year 2020 onwards, deferral is extended to three years for all Executive Directors under the revised policy. 2. No LTIP award will be granted to Mr Warren, who has stated his intention to retire from the company by the end of 2020. 3. Incorporates an adjustment to the formulaic bonus outcome of Mr Jerusalmi, in light of the technology outage in LSE plc in August 2019 when he was Director of Capital Markets. Board changes As announced on 18 October 2019, Mr Warren has stated his intention to retire from the company and step down from the Board by the end of 2020. He will continue in his current role as Group CFO and a member of the Board through the close of the Refinitiv transaction to ensure a smooth transition to his successor. LSEG is undertaking a global search, led by the Board’s Nomination Committee. As Mr Warren has announced his retirement from the company, the Committee will not be amending his pension contribution, nor will the Committee be granting him a LTIP award for 2020. The new Group CFO, once appointed, will be employed on terms consistent with the revised policy and with reference to the size and complexity of the combined business, in the event that the transaction completes.

Share plan rules and approvals We will seek shareholder approval for our Deferred Bonus Plan at our forthcoming AGM, reflecting our continued commitment to alignment with shareholder interests through employee share ownership. Specifically, our policy of mandatory deferral of a portion of bonus into shares for Executive Directors and the Executive Committee is being extended to senior management across our business for performance year 2020 onwards. Further detail is provided on page 119.

Concluding remarks The Committee continues to ensure the Group’s approach to remuneration takes into account best practice and market trends in the financial services sector and wider market while continuing to support the commercial needs of the Group, the interests of shareholders and of all other stakeholders. We look forward to your support for these proposals at the forthcoming AGM.

Jacques Aigrain Chair of the Remuneration Committee 28 February 2020

This report has been prepared in accordance with Schedule 8 to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended), and the relevant sections of the Listing Rules.

London Stock Exchange Group plc 102 Annual Report 31 December 2019 Governance Directors’ Remuneration Report

At a glance Full details of our revised Remuneration Policy are set out on pages 104–113. The table below illustrates the structure and time horizons of each key remuneration element, demonstrating the long-term focus of our revised policy.

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Executive Directors

Salary

Pension and benefits

Annual Bonus 50% in cash 50% in shares, 3 year deferral period (subject to malus and clawback provisions*)

LTIP 3 year performance period 2 year holding period (subject to malus and clawback provisions*)

Post-employment Minimum shareholding requirement to be reached Shareholding requirements shareholding requirement for within 5 years of appointment 2 years post-departure

Non-Executive Directors

Fees

Minimum shareholding requirement Shareholding requirement to be reached within 3 years of appointment

* The Committee has discretion to enforce malus and clawback in certain circumstances, including: misstatement, negligence, fraud, serious misconduct, significant reputational damage, certain misbehaviour, material failure of risk management or any other circumstances the Committee deem similar in nature or effect. Clawback will normally apply for a period of 3 years following vesting of shares/deferred cash bonus and/or payment of bonus, unless the Committee determines otherwise.

London Stock Exchange Group plc Annual Report 31 December 2019 103 Directors’ Remuneration Report (continued)

Remuneration Policy Report Our Remuneration Policy was last subject to a binding shareholder vote at the 2017 AGM and was passed with 98.5% support. This section sets out our revised policy which will be subject to shareholder approval at the AGM in April 2020, and if approved, is intended to be in effect for the following three years from the date of the AGM.

Remuneration Policy table The Remuneration Policy is designed to support the long-term interests of the The revised policy is set out in the following table and includes the following changes Group. The Group is committed to paying for performance, rewarding the senior to our existing policy. The rationale for the proposed changes is provided in the management team only when its goals are achieved. Each year the Statement by the Chair of the Remuneration Committee, set out on page 98–99. remuneration framework and the packages of the Executive Directors and members of the Executive Committee are reviewed by the Committee to ensure ––Pension contributions for new hires will be limited to 10% of salary (reduced that they continue to achieve this objective. The Committee takes into account from up to 25%) in line with the wider workforce. multiple reference points when setting pay including companies in the FTSE 100, the broader Financial Services sector and other international exchange groups ––The period of mandatory deferral of 50% of bonus into shares will be extended and financial markets infrastructure companies. from 2 years to 3 years for all Executive Directors. ––Within the LTIP framework, absolute TSR will be replaced as a performance During the year, the Committee conducted an extensive review of our measure with relative TSR. Any one measure will not exceed two thirds of Remuneration Policy in consultation with our shareholders and their the award. representative bodies and has taken the following areas into account in developing the revised policy: ––For awards granted from 2020, express provisions will be added to enhance the Committee’s ability to enforce malus and clawback in the event of a ‘material ––a focus on shareholder value; failure of risk management’. This enhancement supplements previous ––the continued global expansion of the Group; enhancements made in 2019 to strengthen the provisions in respect of individual conduct and behaviour. ––the need to attract and retain senior management from the international finance and technology sectors; ––A post-employment shareholding policy will be introduced requiring Executive Directors to hold 100% of the lower of their MSR and their actual shareholding ––corporate governance developments; for 2 years post-departure. ––remuneration arrangements for the wider workforce; ––A shareholding requirement for Non-Executive Directors will be introduced of ––the Group’s intent to be mindful of best practice as expressed by institutional 1x basic annual fees to be built up within 3 years of appointment. shareholders and their representative bodies; ––An intercontinental travel allowance will be introduced for Non-Executive ––the unique position of the Group at the heart of capital markets; and Directors to reflect the global nature of the company’s business, with an increasing focus on business in countries in the US and Asia and the additional ––the transformative transaction with Refinitiv. time commitment required for travel.

London Stock Exchange Group plc 104 Annual Report 31 December 2019 Governance Directors’ Remuneration Report

The principles prescribed by the UK Corporate Governance Code were also taken into account by the Committee in determining the revised policy. Details of how these were addressed are provided below

Principle How the Committee has addressed this under the Remuneration Policy Clarity The Committee is satisfied that the remuneration arrangements in the revised policy are transparent, comprising elements that are commonplace in the market and best practice remuneration provisions. Simplicity No significant structural changes to incentive plans are proposed. The Committee concluded that the operation of the Annual Bonus and LTIP would remain easy for stakeholders to understand. The replacement of absolute TSR as a performance measure within our LTIP framework with relative TSR aligns to the UK market-standard approach. Risk The Committee is satisfied that the Remuneration Policy ensures that the risks from excessive rewards and target-based incentive plans are mitigated by: ––Setting defined limits on the maximum awards which can be earned ––Requiring the deferral of a substantial proportion of the incentives in shares for a material period of time ––Aligning the performance conditions of incentives with the strategy and business model of the Company ––Ensuring the Committee has overriding discretion to depart from formulaic outcomes and the ability to apply malus and clawback to incentives where appropriate Furthermore, the malus and clawback provisions have been enhanced to include express provisions for the material failure of risk management or any other circumstance that the Committee deems similar, in exercising its discretion. Predictability Illustrations of the potential outcomes under the Policy are provided on page 113. Defined limits on the maximum awards which can be earned are also disclosed on pages 107–108. Proportionality The Company's performance-based remuneration is clearly linked to the implementation of the Company's strategy with key KPIs used as performance measures for incentive plans. The Committee also has overriding discretion to adjust incentive outcomes based on a broad set of factors to ensure they fairly and accurately reflect the Company’s performance over the relevant period and wider circumstances. Alignment to culture The Group bonus pool assessment will continue to be based on the achievement of financial and strategic goals of the Group, including cultural objectives. The Committee place great importance on ensuring our pay policies and incentives support the desired culture and behaviours of the Group. The individual scorecard implemented from 2019 for our Group Executive team and Executive Directors provides the Committee with greater structure in determining the bonus of senior management. Within this scorecard there is a greater proportion assessing cultural objectives and behavioural performance, including 360° feedback, to allow for a stronger emphasis on how the individuals achieved their targets. For more information about our culture please see the supporting sustainable growth section of this report on pages 40–50.

The enhancements to our policy ensure that it continues to align executive remuneration and shareholders’ long-term interests, adheres to evolving best practice and that our remuneration outcomes are appropriate in the context of the business model going forward.

The Committee recognises and manages any conflict of interest when receiving views from executive directors or senior management on executive remuneration and no individual is involved in deciding their own remuneration.

We will continue to consult with shareholders and investor bodies as we implement the revised policy over the following years.

London Stock Exchange Group plc Annual Report 31 December 2019 105 Directors’ Remuneration Report (continued) Remuneration Policy Report

Policy table for Executive Directors

Salary Benefits Purpose and link to strategy Purpose and link to strategy Provides a core element of remuneration which reflects the responsibilities of ––Provide local market competitive benefits and support the well-being the role. of employees. Enables the recruitment and retention of individuals of the calibre required to execute the Group’s strategy.

Operation Operation Base salaries are normally reviewed annually by taking into account a range of A flexible benefits plan is offered, in which individuals have certain core factors, including: benefits (such as private medical, life assurance, income protection and, additionally in Italy only, disability, accident, car, fuel allowance and luncheon ––size and scope of the role; vouchers) together with (in the UK) a taxable cash allowance which can be ––size, complexity and global breadth of the organisation; spent on elective benefits (such as additional medical, life or dental cover). ––skills and experience of the individual; Car transportation may also be provided for Executive Directors where appropriate. ––market competitiveness/relative positioning; Due to the high profile of the Group, the Committee reserves the right to ––performance of the Group and of the individual; provide our Executives with the appropriate level of security arrangements to ––wider market and economic conditions; and allow them to perform their duties in the safest possible conditions. ––level of increases being made across the Group. Benefits are reviewed periodically to ensure they remain affordable and Any changes are normally effective from 1 April each year. competitive. The Committee retains the discretion to provide reasonable additional benefits as appropriate – for example, relocation and other allowances including expatriate assistance, housing and school fees for a finite period, tax preparation and filing assistance and flights back to the home country for the Executive and their family. Repatriation costs are met by the Company if employment is terminated by the Company, other than for just cause. Where necessary any benefits may be grossed up for taxes. Executives are eligible to participate in the Group’s HMRC tax favoured Save As You Earn Option Scheme (or international equivalent) on the same basis as other employees. Executive Directors are covered by the Directors’ and Officers’ insurance and indemnification.

Maximum Opportunity Maximum Opportunity There is no defined maximum salary. There is no defined maximum. Increases are determined based on the factors described in the Operation Benefits plans are set at (what are in the Committee’s opinion) reasonable column. levels in order to be market competitive for their local jurisdiction and are dependent on individual circumstances. The Committee’s normal approach is to initially consider increases within the range awarded to other employees. More significant increases may be awarded Participation in the Save As You Earn Option Scheme (or international in certain circumstances, such as where there is a significant change in the equivalent) is capped at the same level as all other participants, which is scale, scope or responsibility of a role, where the organisation has undergone determined by the Company within the parameters of applicable legislation. significant change, development within a role and/or significant market movement. The annual base salaries in FY2019 and for FY2020 for each Executive Director are set out in the Annual Report on Remuneration.

Performance Measures Performance Measures N/A N/A

London Stock Exchange Group plc 106 Annual Report 31 December 2019 Governance Directors’ Remuneration Report

Retirement benefits Annual Bonus Purpose and link to strategy Purpose and link to strategy Provide Executives with retirement benefits. Rewards annual performance against challenging financial, strategic and individual targets linked to Group strategy. Support recruitment and retention of high-calibre people. Deferral reinforces retention and enhances alignment with shareholders by encouraging longer-term focus and sustainable performance..

Operation Operation Provision of annual pension allowance, invested in the Company’s defined The Group operates a Group-wide bonus pool which is funded based on the contribution plan or taken as a cash allowance. achievement of financial and strategic goals of the Group. Allocations to individual Executive Directors are made from this pool based on the In certain jurisdictions, more bespoke pension arrangements may be provided. Committee’s assessment of their individual performance, taking into account In such circumstances, the Committee will give appropriate consideration to the Group’s financial and strategic performance and the achievement of any local employment legislation, market practices and the cost of the individual objectives related to their role. arrangement. Performance targets are reviewed and set by the Committee at the beginning of each performance year. Awards are determined by the Committee after the year end based upon the actual performance against these targets. The Committee applies judgement where necessary to ensure approved pay-out levels are reflective of actual, overall performance and has the ability to exercise discretion in adjusting the formulaic outcome of incentives to ensure the outcome is reflective of the performance of the Company and the individual over the period. ––50 per cent of the annual bonus will be subject to mandatory deferral, normally for a period of three years. ––Bonus deferral will be 100 per cent into shares. ––Dividends (or equivalent) may be paid in respect of deferred shares on vesting. ––Deferred awards are subject to malus provisions as described below. Paid bonuses and vested awards are subject to clawback as described below.

Maximum Opportunity Maximum Opportunity The maximum annual pension contribution/cash allowance for Executive Maximum annual bonus opportunity of 225 per cent of salary for CEO and Directors is 10 per cent of salary (except where determined by local market 200 per cent of salary for other Executive Directors for maximum performance. practice or where an Executive Director has given notice to retire at the time this policy takes effect). In Italy, Mr Jerusalmi accrues mandatory state pension (INPS) benefits which are calculated on salary, benefits and annual bonus. Actual benefit due at retirement is set out by the applicable Italian legislation in force from time to time. Under the Italian Trattamento di Fine Rapporto (TFR), he receives contributions which are funded by the Group at a rate fixed by local law and which are paid to Mr Jerusalmi’s private pension plan. TFR is calculated on salary, capped benefits, annual bonus and LTIP.

Performance Measures Performance Measures N/A Based on a combination of financial (e.g. adjusted operating profit), strategic and individual performance targets. Strategic objectives include key targets under the strategic pillars of developing our partnership approach, driving global growth and delivering best in class capabilities. These strategic objectives also impact financial results in the medium term. The Committee will set the detail and mix of performance measures, targets and weighting based on the strategic objectives at the start of each year. At least 50 per cent of the targets relating to the annual bonus pool in any year will be subject to financial measures. No bonuses are paid for below threshold performance. The Committee may award any amount between zero and 100 per cent of the maximum opportunity. The performance measures are applied in the performance year only.

London Stock Exchange Group plc Annual Report 31 December 2019 107 Directors’ Remuneration Report (continued) Remuneration Policy Report

LTIP (Long Term Incentive Plan) 2014 Share ownership

Purpose and link to strategy Purpose and link to strategy Incentivises performance over the longer term through the award Ensures alignment with shareholders’ interests. of performance related shares. Aligns reward with long-term, sustainable Group performance and a focus on shareholder value.

Operation Operation ––Under the LTIP 2014, which was approved by shareholders at the 2014 AGM, Executive Directors are expected to build up share ownership over a period of awards of shares (or equivalent) are granted annually subject to performance five years and maintain holdings of at least 3x base salary. conditions. Executive Directors are expected to hold 100 per cent of their minimum ––Awards normally vest subject to performance targets assessed over a shareholding requirement for two years post-departure. performance period, normally of at least three financial years with an additional holding period of two years. The Committee has discretion to set In cases where the individual has not had sufficient time to build up share different performance periods if it considers them to be appropriate. ownership to meet the minimum shareholding requirement, the post- ––The Committee shall determine the extent to which the performance employment shareholding requirement will be based on their actual level of measures have been met. The Committee may make adjustments to shareholding on departure. performance targets if an event occurs that the Committee determines that The Committee has discretion to vary or waive part or all of the post- an adjustment is appropriate. The performance targets will be at least as employment shareholding requirement in exceptional circumstances. challenging as the ones originally set. ––The Committee has the ability to exercise discretion in adjusting the formulaic outcome of incentives to ensure the outcome is reflective of the performance of the Company and the individual over the period. ––Dividends (or equivalent) may be paid on vesting. Unvested awards are subject to a malus provision and vested awards are subject to clawback, as described below. Maximum Opportunity Maximum Opportunity Although there is a facility for maximum awards of up to 400 per cent of salary N/A under the plan rules in exceptional cases, it is expected that awards under this plan will normally be up to 300 per cent of salary.

Performance Measures Performance Measures The Committee determines performance targets each year to ensure that the N/A targets are stretching and support value creation for shareholders while remaining motivational for management. Vesting of awards is subject to achievement of total shareholder return and other financial performance targets. Any one measure will not exceed two thirds of the award. For each performance element, achievement of the threshold performance level will result in no more than 25 per cent of the maximum award paying out. For achievement of the maximum performance level, 100 per cent of the maximum pays out. Normally, there is straight-line vesting between these points.

London Stock Exchange Group plc 108 Annual Report 31 December 2019 Governance Directors’ Remuneration Report

Notes to the Policy Table Recruitment policy Selection of performance measures When determining the remuneration package for a newly appointed Executive Performance targets are set by the Committee to be both stretching and Director, the Committee would seek to apply the following principles: achievable, taking into account the Group’s strategic priorities and the ––The package should be market competitive to facilitate the recruitment of economic landscape. individuals of sufficient calibre required by the Group. Consistent with the UK Corporate Governance Code, the Committee would intend to pay no more than The performance measures that are used for our annual bonus and Long Term it believes is necessary to secure the required talent. Incentive Plan (LTIP) have been chosen to support the Group’s strategy. For the annual bonus plan, the Committee continues to believe that it is appropriate to ––The ongoing remuneration package would normally include the key elements use a balance between financial targets, strategic objectives and individual on the same terms as those set out in the policy table for Executive Directors. performance objectives. ––The maximum level of variable remuneration which may be awarded on recruitment (excluding any buy-outs referred to below) is 625% of salary. The Committee considers that the measures to be used for the LTIP, i.e. TSR and Incentive awards made in the first year of appointment may be subject to adjusted EPS, are currently the most appropriate measures of long-term different performance measures and targets appropriate to the newly recruited performance for the Group. The Committee will continue to review the LTIP Executive Director. measures, weightings and targets on an annual basis, to ensure their continued suitability and to ensure they are stretching both for LSEG as a standalone ––Recognising that the Group competes for talent in the international financial company and the combined business, should the Refinitiv transaction complete. services sector, on an exceptional basis, the Committee has the ability to include other elements of pay which it feels are appropriate taking into account Malus and clawback provisions the specific commercial circumstances (e.g. for an interim appointment). A malus provision applies to awards granted under the 2014 LTIP and to unvested However, this would remain subject to the limit on variable remuneration set awards under the Deferred Bonus Plan. This would allow the Committee in its out above. The rationale for any such component would be appropriately absolute discretion to determine, at any time prior to the vesting of an award, to disclosed. reduce, cancel or impose further conditions in certain circumstances, including ––In addition, where an individual forfeits arrangements as a result of (i) where there is a material misstatement or restatement of the results of the appointment, the Committee may offer a buy-out, in such form as the Group in its audited accounts, (ii) the negligence, fraud or serious misconduct of Committee considers appropriate taking into account all relevant factors which the individual which results in significant reputational damage to the Group or may include the vehicle, expected value and timing of forfeited opportunities. which has a material adverse effect on the financial position of the Group or the Any such buy-out will be limited to the commercial value of payments and business opportunities of the Group, (iii) if the individual is a member of a awards forfeited by the individual. business unit in the Group which suffers significant reputational damage or material adverse effect on its financial position or on its business opportunities, ––Where an Executive Director is required to relocate from their home location to (iv) where behaviour of the individual is considered to breach the standards of the take up their role, the Committee may provide reasonable relocation assistance Group’s Code of Conduct, or where there is serious misconduct that has and other allowances including expatriate assistance. Global relocation support significant reputational consequences for the Group or a relevant business unit, (normally for up to five years) and any associated costs or benefits (including (v) where there is a material failure of risk management in the Company or any but not limited to housing, school fees, tax preparation and filing assistance member of the Group or a relevant business unit, (vi) where an error in assessing and flights back to the home country) may also be provided if business needs any performance conditions is discovered, or (vii) any other circumstances that require it. Should the Executive’s employment be terminated without cause by the Committee deems to be similar in nature or effect to those above. the Group, repatriation costs will be met by the Group. ––In the event that an internal candidate was promoted to the Board, legacy A clawback provision applies to vested awards granted under the 2014 LTIP, terms and conditions would normally be honoured, including pension vested awards under the Deferred Bonus Plan and annual bonuses paid entitlements and any outstanding incentive awards. previously. This would allow the Committee in its absolute discretion to claw back from individuals some or all of the vested awards or paid bonus in certain ––The remuneration package for a newly appointed Non-Executive Director would circumstances, including (i) if there is a material misstatement or restatement of normally be in line with the structure set out in the policy table for Non- the results of the Group in its audited accounts, (ii) the negligence, fraud or Executive Directors (see page 112). serious misconduct of the individual which results in significant reputational damage to the Group or a material adverse effect on the financial position of the Group or the business opportunities of the Group, (iii) if the individual is a member of a business unit in the Group which suffers significant reputational damage or material adverse effect on its financial position or on its business opportunities, (iv) where behaviour of the individual is considered to breach the standards of the Group’s Code of Conduct, or where there is serious misconduct that has significant reputational consequences for the Group or a relevant business unit, (v) where there is a material failure of risk management in the Company or any member of the Group or a relevant business unit, (vi) where an error in assessing any performance conditions is discovered, or (vii) any other circumstances that the Committee deems to be similar in nature or effect to those above. Clawback will normally apply for a period of 3 years following vesting of shares/deferred cash bonus and/or payment of bonus, unless the Committee determines otherwise.

London Stock Exchange Group plc Annual Report 31 December 2019 109 Directors’ Remuneration Report (continued) Remuneration Policy Report

Service contracts and payments for departing Directors Treatment of variable incentives The Group’s current policy is that Executive Directors’ service agreements should Annual bonus have notice periods that are no longer than 12 months. The Group may terminate Individuals may be considered for an annual bonus in respect of the period an Executive Director’s service agreement by making a payment in lieu of notice prior to cessation. Any award would be at the discretion of the Committee, of a sum equal to 12 months’ salary, pension, flexible benefits allowance, life and subject to the Executive Director’s performance and period of employment. medical insurance (but excluding bonus and share incentives) plus any accrued unused holiday entitlement. Consideration will be given to appropriate mitigation Deferred Bonus Plan terms to reduce payments in lieu of notice made on termination in the event of For good leavers, awards will usually vest at the normal vesting date, although the Executive Director commencing alternative employment, being appointed as the Committee may determine that awards vest on cessation of employment. a Non-Executive Director or providing services pursuant to a consultancy The award will usually vest in full, or on a prorated basis at the Committee’s agreement in the 12 months following the Executive Director’s departure. discretion. Good leavers are those who cease to be an employee of a member of the Group by reason of death, injury, disability, ill-health, redundancy, the The Group may pay an Executive Director’s reasonable legal fees for receiving sale of the individual’s employing business or the transfer of the Company advice in connection with their employment. out of the Group, or any other reason which the Committee decides in its discretion, having regard to a range of relevant factors including the Executive The lawful termination mechanisms described above are without prejudice to the Director’s performance, length of service and circumstances of their departure. Group’s ability in appropriate circumstances to terminate in breach of the notice period referred to above, and thereby to be liable for damages to the Executive Where an individual is not considered to be a good leaver, unvested awards Director. Liquidated damages clauses are not used. will lapse. Where an individual is summarily dismissed, all awards will lapse.

In the event of termination by the Group, each Executive Director may have an Deferred awards are subject to malus and vested awards are subject to entitlement to compensation in respect of his statutory rights under clawback as detailed above. employment protection legislation in the UK and potentially elsewhere. Directors’ and Officers’ liability insurance and an indemnity to the fullest extent permitted We are seeking shareholder approval for the Deferred Bonus Plan at our by the law and the Group’s Articles of Association are provided to the Executive forthcoming AGM. Formal approval of the plan and its rules is being sought in Directors for the duration of their employment and for a minimum of 7 years connection with the extension of mandatory deferral, beyond the Executive following termination. Directors and Executive Committee, to senior management across our business.

The Committee considers that this is consistent with current best practice and Long-Term Incentive Plan 2014 this approach will generally be adopted for new appointments. Where For good leavers, awards will normally vest at the normal vesting date and appropriate and when recruiting non-UK based Directors, the Committee may following the end of the performance period, unless the Committee agree different terms based on local legal requirements or market practice. determines that awards should vest following cessation of employment. Vesting will be subject to performance and unless the Committee determines otherwise (or that another basis of reduction is appropriate) prorated for time in employment. Good leavers are those who cease to be an employee of a member of the Group by reason of death, injury, disability, ill-health, redundancy, and the sale of the individual’s employing business or transfer of the Company out of the Group, or any other reason which the Committee decides in its discretion, having regard to a range of relevant factors including the Executive Director’s performance, length of service and circumstances of their departure.

Where an individual is not considered to be a good leaver, unvested awards will lapse.

Unvested awards are subject to malus and vested awards are subject to clawback as detailed above.

London Stock Exchange Group plc 110 Annual Report 31 December 2019 Governance Directors’ Remuneration Report

Detailed share plan provisions from 1 October 2001. On 1 April 2013, Raffaele Jerusalmi’s employment contract Share awards are subject to the terms of the relevant plan rules under which the transferred from LSEG Holdings (Italy) to LSEG Holdings Italia S.p.A. If Raffaele award has been granted. The Committee may adjust or amend awards only in Jerusalmi is dismissed, his notice period will be equal to 12 months. If Raffaele accordance with the provisions of the plan rules. This includes making Jerusalmi resigns, he is required to give three months’ notice. On termination of adjustments to awards to reflect certain corporate events, including a variation either employment for any reason, Raffaele Jerusalmi is entitled to severance in the Company’s share capital, a demerger or a special dividend. In change of payments under Italian law equal to: (i) Trattamento di Fine Rapporto (TFR) control circumstances, all LTIP awards will normally vest on an accelerated basis which Raffaele Jerusalmi has elected to transfer to his private pension plan on a to the extent that the performance conditions are satisfied, and, unless the monthly basis since August 2007. He will therefore not be entitled to further TFR Committee determines otherwise, subject to time pro-rating. Deferred Bonus benefits post-employment. The TFR contributions currently equate to 7.407% awards will normally vest in full. The Committee may also allow or require some (including solidarity tax at the current rate of 0.5%, which does not count towards or all of an award to be exchanged if not yet vested. Raffaele Jerusalmi’s contributions to his private pension plan) of base salary, benefits, annual bonus and LTIP paid to Raffaele Jerusalmi during his Individual terms employment; (ii) prorated supplementary monthly payments (the annual salary David Schwimmer entered into a service agreement with the Group on 12 April is normally paid in 12 instalments plus two supplementary monthly payments); 2018 and was appointed with effect from 1 August 2018. David Schwimmer’s and (iii) a payment in lieu of untaken holidays, if any. Where no just cause for service agreement may be terminated by either party giving at least 12 months’ termination exists, a payment in lieu of notice is payable if the employment is notice. Alternatively, the Group may terminate the contract by payment in lieu of terminated with immediate effect. The payment in lieu of notice is in addition to notice of a sum equal to 12 months’ salary, pension, flexible benefits allowance, the payments at (i), (ii) and (iii) above and is equal to the total compensation due life and private medical insurance (but excluding bonus, share incentives and car to Raffaele Jerusalmi during the notice period. In addition, under the banking/ transportation). Any payment in lieu of notice will be paid in equal monthly credit sector collective bargaining agreement, Raffaele Jerusalmi would be instalments from the date of termination of the employment. Should Mr entitled upon termination without reasonable cause to a supplementary Schwimmer commence alternative employment, be appointed as a Non- indemnity payment ranging between 7 and 22 months’ total compensation. For Executive Director or provide services pursuant to a consultancy agreement in these purposes total compensation includes base salary, average of any variable the relevant period (of 12 months) following his departure from the Group, the pay and TFR contributions paid during the last 36 months of the employment, instalments will be reduced by one-twelfth of the annual remuneration earned and benefits in kind. from the alternative employment, directorship or consultancy. Payments of the instalments may be required to be deferred until six months after termination Remuneration policy for other employees and consideration of wider by US tax rules applying to Mr Schwimmer. To the extent that any payment or employee remuneration benefits payable to Mr Schwimmer under his service agreement or under any The Committee has responsibility for overseeing arrangements for all employees bonus or share incentive plan would be subject to US excise tax, the payments and reviews broader workforce policies and practices in order to support and benefits may be reduced if this would result in Mr Schwimmer receiving a decisions on executive pay. greater after tax amount than if the benefits were not reduced. On termination (other than by reason of summary dismissal) Mr Schwimmer will be eligible to Paying our employees fairly relative to their role, skills, experience and receive a pro-rata bonus for the year in which his employment is terminated performance is central to our approach to remuneration, and our reward subject to company and individual performance. framework and policies support us in doing this. Our Group-wide reward framework establishes the compensation structure, elements and leverage for David Warren entered into a service agreement with the Group on 11 June 2012 each career stage in the organisation, providing the Committee with oversight and was appointed with effect from 2 July 2012. David Warren’s service of workforce remuneration. agreement may be terminated by either party giving at least 12 months’ notice. Alternatively, the Group may terminate the contract by payment in lieu of notice The Committee place great importance on ensuring our pay policies and incentives of a sum equal to 12 months’ salary, pension, flexible benefits allowance, life and support the desired culture and behaviours of the Group. As detailed in the ‘Annual private medical insurance (but excluding bonus and share incentives). Any bonus operation’ section on page 120, an individual scorecard was implemented payment in lieu of notice will be paid in 12 equal monthly instalments from the from 2019 for our Group Executive team as well as our Executive Directors. This date of termination of the employment. Alternatively, the Group may in its provides the Committee with greater structure in determining the bonus of senior discretion continue to provide pension and life and private medical insurance for management as well as allow for a greater focus on culture and behaviours. the 12 months following termination. Should Mr Warren commence alternative employment, be appointed as a Non-Executive Director or provide services The remuneration policy for senior Executives and other employees is pursuant to a consultancy agreement in the relevant period (of 12 months) determined based on similar principles to Executive Directors. For roles below the following his departure from the Group, the instalments will be reduced by main Board, the exact structure and balance are tailored based on various factors one-twelfth of the annual remuneration earned from the alternative employment, including the scale, scope or responsibility of the role, development within a role directorship or consultancy. Payments of the instalments may be required to be and/or significant market movement. The Committee reviews and comments on deferred until six months after termination by US tax rules applying to Mr Warren. the salary, bonus and LTIP awards of the senior Executives immediately below To the extent that any payment or benefits payable to Mr Warren under his Board level and approves the overall design and distribution of incentive awards service agreement or under any bonus or share incentive plan would be subject to available to all employees, including share-based plans. US excise tax, the payments and benefits may be reduced if this would result in Mr Warren receiving a greater after tax amount than if the benefits were not The approach in respect of base salary and benefits is generally consistent across reduced. On termination (other than by reason of summary dismissal) Mr Warren the organisation. Executive Directors’ and other senior managers’ remuneration will be eligible to receive a pro-rata bonus for the year in which his employment is includes a greater proportion of performance related pay when compared to terminated subject to company and individual performance. other employees. The Committee considers this is essential to differentiate levels of responsibility and align pay to sustainable long-term performance and Raffaele Jerusalmi entered into a service agreement with Borsa Italiana on shareholders’ interests. 1 October 2001, amended on 3 May 2011, and a service agreement with LSEG Holdings (Italy) on 3 May 2011, which reflects his period of continuous service London Stock Exchange Group plc Annual Report 31 December 2019 111 Directors’ Remuneration Report (continued) Remuneration Policy Report

All employees are eligible to participate in the annual bonus plan which is subject on executive remuneration and how it aligns with wider company pay policy is to similar metrics to those used for the Executive Directors. Opportunities vary by undertaken through our Employee Board consultation process. organisational level. Some sales employees are eligible to participate in sales compensation plans rather than the annual bonus plan. The Committee receives ongoing regulatory updates and information on external market practices from its independent external advisers who provide additional 50% of the annual bonus for our Executive Directors and Group Executive team context for decisions. is deferred into shares. For the 2020 performance year, our bonus deferral scheme will be extended below Group Executive level to the Managing Director Consideration of shareholders’ views population. This reinforces the alignment of the pay of our senior employees The Committee is mindful of shareholder views when setting and evaluating with shareholder interests and the Group’s long-term performance. ongoing remuneration principles and commits to consulting with shareholders prior to any significant changes to the remuneration policy. The malus provision on unvested awards applies automatically to all awards granted under the Deferred Bonus Plan and the 2014 LTIP. The Committee also In formulating the revised policy, we undertook an extensive shareholder exercises discretion at each grant date to apply clawback rules to all awards consultation exercise with our major shareholders and investor bodies and are granted, including participants other than Executive Directors. grateful for the valuable feedback provided, which was generally very positive and supportive of the Committee’s approach. As part of the process, we In setting remuneration for Executive Directors, the Committee considers the consulted on the introduction of a post-employment shareholding overall approach to rewarding employees across the Group taking into account requirement. The Committee’s initial proposal was to introduce a requirement the scale, scope or responsibility of the role, development within a role and/or for Executive Directors to hold 100% of their MSR for the first year following significant market movement. departure and to hold 50% of their MSR for the second year. However, further to feedback received during consultation, it has been determined to Salary increases of Executive Directors in percentage terms are normally in line strengthen this further such that Executive Directors will be required to hold with those of employees in their local jurisdictions. Engagement with employees 100% of their MSR for two years post-departure.

Policy for Non-Executive Directors:

Approach to setting fees Basis of fees Other items The fees for Non-Executive Directors are set at a Non-Executive Directors receive a basic annual fee Non-Executive Directors receive an allowance for level which is considered appropriate to attract with additional fees payable for services such as any Board meeting involving intercontinental travel. individuals with the necessary experience and committee chairmanship. ability to make an important contribution to the Travel and other appropriate expenses with Group’s affairs. Certain Non-Executive Directors are also entitled associated taxes (including fees incurred in to receive fees from subsidiary companies. obtaining professional advice in the furtherance The Chair’s fee is determined by the Remuneration of their duties) incurred in the course of performing Committee, and the Board is responsible for The Non-Executive Chair of the Group receives their duties are reimbursed to Non-Executive Directors. determining all other Non-Executive Director fees. an all-inclusive fee for the role. Non-Executive Directors are covered by the Directors’ Fees are reviewed periodically to ensure they remain Fees are neither performance-related and Officers’ insurance and indemnification. appropriate in the context of: the role scope; company nor pensionable. size, complexity and global breadth; and wider market Non-Executive Directors are required to build up conditions. The Committee retains the flexibility to Non-Executive Directors are not eligible to share ownership of at least 1x basic annual fees increase, adjust and make one-off payments to participate in the annual bonus or LTIP plans and within three years of appointment. Non-Executive Directors based on their remit. are not entitled to any payments on termination.

Fees are set taking into account the level of responsibility of each Non-Executive Director and fees at other companies of a similar size and complexity.

The aggregate fees payable to all Non-Executives combined (excluding the Chair and excluding fees paid for any appointments on subsidiary boards) are capped as set out in the Group’s Articles of Association as they may be amended by a resolution of shareholders from time to time. The current limit on the aggregate fees that are payable is £1,500,000 per financial year.

Non-Executive Directors have letters of appointment with no notice period except for the Group Chair who has a notice period of 6 months unless he is not re-elected by shareholders in which case his appointment will terminate immediately. The Non-Executive Directors’ appointments are for an initial period of 3 years from the date of appointment and are also subject to re-election by shareholders.

London Stock Exchange Group plc 112 Annual Report 31 December 2019 Governance Directors’ Remuneration Report

Amendments to the Remuneration Policy Report David Schwimmer The Committee remains mindful that regulation of companies in the financial 6,387 services sector continues to evolve. The Committee recognises that remuneration 19% arrangements may need to be amended in order to comply with any new 5,187 regulations which become applicable to the Group. The Committee reserves the right to make changes to the Policy described above in order to comply with any 46% 38% such regulatory requirements which apply to the Group including any changes 3,087 required under the UK Corporate Governance Code or for regulatory, exchange 39% control, tax or administrative purposes or to take account of a change in 35% 28% legislation without obtaining shareholder approval for that amendment. Where 987 29% this results in a major structural change, the Committee would expect to present 100% 32% 19% 15% a revised policy to shareholders for approval at the following AGM. Fixed Mid Maximum Maximum plus share price growth Illustration of the application of the remuneration policy for David Warren Executive Directors The chart on the right illustrates how much the current Executive Directors could 4,012 receive under four different performance scenarios in the first year of this policy 3,262 19% taking effect i.e. 2020: minimum, mid-range, maximum and maximum 46% 37% assuming a 50% increase in share price for LTIP awards during the vesting 2,012 37% period. Note that London Stock Exchange Group plc does not have a stated 31% 25% ‘target’ level for share awards, so we have assumed 50% of maximum awards 762 25% to illustrate a mid-range scenario. 100% 38% 23% 19% Fixed Mid Maximum Maximum plus share price growth Element of remuneration Detail of assumptions Raffaele Jerusalmi Fixed remuneration This comprises: 3,858 ––Base salary with effect from 1 April 2020 ––Benefits as they applied on 31 December 2019 and 3,167 18% set out in the single figure table in the Annual 36% Remuneration Report but excluding the CEO’s fixed 2,016 44% term relocation allowance (£150,000 p.a.) which 34% 29% 24% ceases in July 2021. 865 23% ––Pension 100% 43% 27% 22% Annual Bonus Assumes maximum opportunity of 225% of salary for Fixed Mid Maximum Maximum plus CEO and 200% of salary for other Executive Directors share price growth For mid-range scenario: assumes payment of 50% of Fixed remuneration Annual variable remuneration the maximum opportunity Long term remuneration Share price growth For maximum: assumes payment of 100% of the Absolute values are £k maximum opportunity Long Term Incentive Assumes maximum opportunity of 300% of salary in Legacy arrangements Plan conditional shares The Committee may make any remuneration payments and payments for loss For mid-range scenario: assumes 50% of the maximum of office (including exercising any discretions available to it in connection with opportunity such payments) where the terms of the payment were agreed/granted (i) before For maximum: assumes vesting of 100% of the the policy came into effect or (ii) at a time when the relevant individual was not a maximum opportunity plus a second scenario Director of the Group and, in the opinion of the Committee, the payment was not assuming a 50% increase in share price during the in consideration for the individual becoming a Director of the Group. performance period

London Stock Exchange Group plc Annual Report 31 December 2019 113 Directors’ Remuneration Report (continued)

Annual Report on Remuneration This section sets out how remuneration arrangements have operated during the past financial year (FY2019), and also provides details on how we intend to operate our policy during the coming year (FY2020). This report will be put to an advisory vote at the 2020 AGM. The information from this page 114 to page 128 has been audited where required under the regulations and is indicated as audited where applicable.

Single total figure of remuneration for Executive Directors (Audited)

David Schwimmer David Warren Raffaele Jerusalmi14 Single total figure FY2019 % FY2018 % FY2019 % FY2018 % FY2019 % FY2018 % of remuneration £000 of total £000 of total £000 of total £000 of total £000 of total £000 of total Fixed pay Salary 775 323 500 617 460 463 Flexible benefits allowance 15 6 20 20 Benefits 2403 1743 1086 906 4110 2810 Pension 1164 484 1257 1247 17411 26711 Other 1,0505 19012 20512 Total fixed pay 1,146 47% 1,601 74% 753 16% 851 23% 865 21% 964 30%

Pay for performance Annual bonus 1,310 552 732 9318 588 683 Long term incentive– 1,4642 1,1469 1,2142 97413 performance1,2 Long term incentive– 1,8142 7519 1,5052 63813 share price growth1,2 Total pay for performance 1,310 53% 552 26% 4,010 84% 2,827 77% 3,306 79% 2,295 70%

Total remuneration 2,456 2,153 4,763 3,679 4,172 3,258

Notes to the table: David Warren 1. Value for Long Term Incentives shown for FY2019 represents estimated value 6. Benefits include the cash value of private medical, income protection and life of share awards granted in 2017 that vest in April 2020. The estimate is based assurance plus expatriate allowances and commuting expenses (including car on the confirmed 100% vesting of the EPS element and forecast 100% vesting transportation where appropriate) with associated taxes. of the TSR element, which will be confirmed in April 2020. 7. Annual pension allowance of 25% of salary. 2. The value delivered through performance is calculated as the number of 8. FY18 bonus calculated per 7 months as Interim CEO (including step-up shares forecast to vest in April 2020 multiplied by the share price on the date allowance) plus 5 months as CFO. of grant. The value delivered through share price growth is calculated as the same number of shares multiplied by the difference between the average 9. 39,922 Performance shares vested on 17 March 2019 at £47.50 per share. share price in the last 3 months of the financial year, being £71.01 and the This equates to £1,896,295. share price on the date of grant. The Committee does not intend to amend the outcome or make any adjustments in regard to share price growth over the Raffaele Jerusalmi period, on the basis that this reflects our view of the Group’s underlying 10. Benefits represent the cash value of private medical, disability and life performance and returns for shareholders over the performance period. insurance cover, luncheon vouchers, car and fuel benefit. 11. Pension: mandatory INPS contributions calculated on salary, benefits and David Schwimmer bonus for the 12-month period. 3. Benefits include the cash value of private medical, income protection and life assurance plus expatriate allowances and commuting expenses (including car 12. Trattamento di Fine Rapporto mandatory arrangements calculated on salary, transportation where appropriate) with associated taxes. capped benefits, bonus and shares and paid into Mr Jerusalmi’s pension plan for the 12-month period. 4. Annual pension allowance of 15% of salary. 13. 33,923 Performance shares vested on 17 March 2019 at £47.50 per share. 5. A one-off payment of £1,050k was made in March 2019 to compensate for the This equates to £1,661,343. forfeiture of cash compensation for 2018 from his previous employer. There were no other buy-outs. 14. FY2019 rate of £1 = €1.14 and FY2018 rate of £1 = €1.13.

London Stock Exchange Group plc 114 Annual Report 31 December 2019 Governance Directors’ Remuneration Report

Additional notes to the Single total figure of remuneration (Audited) Raffaele Jerusalmi receives benefits in kind that include private medical, Fixed pay disability and life insurance cover, luncheon vouchers, car and fuel. He also Base salary contributes towards the Italian mandatory national insurance system. When reviewing Executive Director salaries, and in line with our policy, the Committee considers multiple reference points including companies in the FTSE There are no contractual malus or clawback provisions in place in relation to benefits. 100, the broader Financial Services sector and other international exchange groups. Executive Directors are covered by the Directors’ and Officers’ insurance and Benefits indemnification. A flexible benefits plan is offered, in which individuals have certain core benefits (such as private medical, life assurance, income protection and, additionally in Retirement Benefits Italy only, disability, illness, accident, car, fuel allowance and luncheon vouchers) In the UK, pension provision for our Executive Directors takes the form of a together with (in the UK) a taxable cash allowance which can be spent on elective non-consolidated cash allowance; only base salary is used to calculate pension benefits (such as additional medical, life or dental cover). Where received as a entitlement and no other pension supplements apply. cash supplement, this allowance is not used to calculate bonus payments or pension contributions. David Schwimmer received an allowance equivalent to 15% of base salary as a taxable cash supplement. For 2020, this will be reduced to 10%. Benefits are reviewed periodically to ensure they remain affordable and competitive. Executives are eligible to participate in the Group’s HMRC tax-favoured David Warren receives an allowance equivalent to 25% of base salary as a taxable SAYE Scheme (or international equivalent). cash supplement. The Committee do not intend to amend Mr Warren’s allowance as he has announced his retirement from the company. David Schwimmer receives a flexible benefits allowance of £15,000 per annum. In addition, he receives benefits in kind which include private health care, Raffaele Jerusalmi accrues mandatory state pension (INPS) benefits in Italy. permanent health insurance and life assurance arrangements. Mr Schwimmer is Actual benefit due at retirement is set out by the applicable Italian legislation in also provided with car transportation where appropriate. force from time to time. Under the Italian TFR, he receives contributions which are funded by the Company at a rate fixed by local law and which are paid to Mr As an expatriate from the US to UK, David Schwimmer receives the following: Jerusalmi’s private pension plan. Both INPS and TFR contributions are included in the Single total figure of remuneration table on the previous page. ––For the first three years of employment, an annual allowance of £150,000 in respect of accommodation expenses. Bonus awarded for FY2019 Executive Directors are eligible to receive an annual bonus based on meeting or ––Tax preparation and filing assistance in the US and the UK. exceeding bonus targets that are set at the beginning of the year, looking at the ––The Group will meet the costs of repatriating Mr Schwimmer’s effects back to Group’s financial performance, strategic deliverables and their personal contribution. the US if it terminates his employment other than in circumstances such as serious misconduct which would justify summary termination. The Committee also receives input from the Risk Committee with regard to performance related to risk culture (awareness, transparency and accountability) ––For the first five years of employment, an annual allowance of up to £50,000 to when assessing remuneration decisions. cover flights between London and the US for Mr Schwimmer and his family. The operation of the FY2019 annual bonus is as per last year. The Group bonus David Warren receives a flexible benefits allowance of £20,000 per annum, which is pool continues to be assessed against 60% financial performance and 40% unchanged since last year. In addition, he receives benefits in kind which include against strategic deliverables. The Committee considers AOP to be of particular private health care, permanent health insurance and life assurance arrangements. significance for the Group and believes it should continue to be the main financial measure for annual bonus plan purposes. As per 2018, the maximum As an expatriate from the US to UK, David Warren receives the following: bonus opportunity is 225% of salary for the Chief Executive Officer and 200% of salary for other Executive Directors. ––Tax preparation and filing assistance in the US and the UK. ––The Group will meet the costs of repatriating Mr Warren’s effects back to the US The Executive Directors’ awards are funded from the Group bonus pool. For if it terminates his employment other than in circumstances such as serious FY2019 onwards the performance of the Executive Directors and Group Executive misconduct which would justify summary termination. team is assessed as part of a scorecard. This scorecard aligns the bonus assessment with the construct of the Group bonus pool: 60% against Group AOP; ––An annual allowance of up to £30,000 net per annum to cover flights between 40% against strategic deliverables. The ‘strategic’ element includes key Group London and New York for Mr Warren and his family. strategic initiatives as well as personal and divisional objectives.

Further to our commitment to ensure a greater focus on the development of culture for the Group, the Committee determined that within this scorecard there should be a greater proportion assessing behavioural performance, to allow for a stronger emphasis on how the individuals achieved their targets. A 360° feedback process informs part of the assessment of the personal element of the scorecard.

London Stock Exchange Group plc Annual Report 31 December 2019 115 Directors’ Remuneration Report (continued) Annual Report on Remuneration

Determination of Bonus for FY2019 The Committee determined the overall Group bonus pool with reference to the 12-month performance period ending 31 December 2019. The performance measures and targets are set out below: Performance Maximum Actual relative to percentage percentage Actual performance Target target of bonus of bonus FY2019 Group AOP FY2019 AOP of £1,065m. FY2019 AOP of £1,037m. Above target 60% 38% Group Strategic ––Identification, negotiation, planning and agreement of the strategically Above target 40% 35% Bonus Pool Deliverables transformational acquisition of Refinitiv; ––Arrangement of a Bridge Facility, providing debt refinancing capacity relating to the proposed acquisition; ––Robust management and substantial growth of core business during preparation for the proposed transaction; ––Strategically targeted investments that facilitate expansion and innovation, including the acquisition of Beyond Ratings, a 4.92% stake in Euroclear and an equity interest in Nivaura that supports innovation in the capital raising process; ––Substantial progress in driving the cultural agenda, including significantly improved employee engagement results; leadership capability and development programmes; and the 360° feedback process successfully embedded across the leadership population; ––Following a focus on a number of gender diversity initiatives, the proportion of female candidates hired externally at senior manager level was 41% in 2019, including the appointment of the Head of Government Relations and Regulatory Strategy; ––The formation of a unified Post Trade division, combining our leading clearing and settlement businesses with regulatory reporting services; ––Robust navigation of the regulatory landscape and stakeholder engagement during a period of macroeconomic and political uncertainty including Brexit; ––Organisational enhancements to strengthen our ability to deliver the medium-term strategic agenda, including the formation of a Group Compliance function and the Chief Integration Officer and Chief Operating Officer appointment; ––Innovation across our post trade businesses that continue to drive growth, including substantial NTI revenues, and the securing of an updated Swapclear agreement; ––Continued product and market innovation in relation to sustainability and emerging markets, in particular across our Information Services and Capital Markets divisions; and ––Embedding cyber resilience tools, processes and a risk-averse culture to ensure the strongest possible protection across the Group, whilst recognising there have been some shortfalls in operational resilience and technology. Total 100% 73%

1. AOP excludes amortisation of purchased intangibles, non-underlying items. 2. For the FY2019 Group AOP bonus measure, Threshold was set at Target minus 5% and Maximum was set at Target plus 13%. 3. Target adjusted for IFRS15.

Group adjusted operating proﬁt performance Strategic deliverables performance % of total bonus % of total bonus 60 Maximum: £1,173m (60%) 40 Maximum: (40%)

50 Achieved: (35%) 30 40 Achieved: £1,065m (38%) 30 20 Target: (20%) Target: £1,037m (30%) 20 10 10 Threshold: £982m (8%) Threshold: (5%) 0 0 1. Actual result for Group AOP performance is 63% of maximum. 2. Actual result for Strategic Deliverables performance is 87.5% of maximum.

London Stock Exchange Group plc 116 Annual Report 31 December 2019 Governance Directors’ Remuneration Report

Application of discretion David has also initiated a greater focus on sustainability to ensure the Group plays The Committee has carefully considered the resiliency and technology of the a strong role in enabling positive changes in our markets, such as the development Group in 2019. It is acknowledged that there have been some shortfalls in these of a Sustainable Bond Market and a Green Economy Mark to promote companies areas. Therefore, in recognition of an otherwise exceptional transformative year, with 50% or more revenues from defined green economy activities. the Committee determined that the overall rating of the strategic deliverables should be reduced from 40% to 35%. As the bonuses of Executive Directors and To strengthen our ability to deliver the medium-term strategic agenda, David other Group Executives are hard-wired to LSEG performance, this discretion has has driven organisational enhancements, including the formation of a Group directly reduced their 2019 bonus outcomes. In addition, where the Committee Compliance function and the appointments of a Chief Integration Officer and have deemed appropriate, the formulaic bonus outcomes for certain individuals Chief Operating Officer and other critical roles across the Group’s Executive and have been reduced further. leadership teams.

Chief Executive Officer Chief Financial Officer The Group produced strong financial results as it executes its strategy to deliver David Warren continued in his position as CFO, providing financial support for best-in-class capabilities, drive global growth and develop our partnership approach. growth across the core businesses and strong leadership with respect to the Refinitiv acquisition. David Schwimmer continued in his role as CEO and has overseen strong growth in a challenging macroeconomic and geopolitical environment, continuing the Group’s David has led the Group’s strong financial performance in 2019, supporting new Open Access and customer partnership approach to deliver innovative solutions, growth opportunities while maintaining a focus on investment discipline and demonstrated by the launch of several new products, services and initiatives. cost control, including the delivery of the cost savings programme announced in March 2019. In August 2019, the Group arranged a Bridge Facility in connection On 1 August 2019, the Group announced a proposed transaction to acquire with its proposed acquisition of Refinitiv. The Bridge finance offers the Group Refinitiv, a leading provider of data, analytics and financial markets solutions. greater certainty of availability of funds to potentially refinance the debt it takes David led the identification, negotiation and agreement of this strategically on at completion as a result of the acquisition. During the period the Group transformational acquisition that, should it complete, will provide highly maintained its long-term credit rating, although both agencies moved their complementary capabilities and significantly accelerate the Group’s strategy to be ratings to a negative outlook in anticipation of the impact of the Refinitiv a leading global financial markets infrastructure provider. David has also ensured transaction on net leverage. Both agencies are positive on the strategic rationale the strong management and substantial growth of the Group’s core business of the Refinitiv transaction. The Group’s financial position improved during the alongside the preparation for the proposed transaction, including the Board’s year, with both interest cover and net debt improving over the 12 months to response to the unsolicited approach from Hong Kong Exchanges and Clearing Ltd. 31 December 2019. Reflected in the strong shareholder support for the proposed Refinitiv transaction, David has formed good relationships with investors and his leadership in David was also central to the Group’s M&A activities and strategically targeted developing strategic priorities to deliver further value have been well received. investments in the year that facilitate expansion and innovation, including the proposed acquisition of Refinitiv; the acquisition of Beyond Ratings; and Furthermore, the Group announced the acquisition of a 4.92% minority stake purchase of a 4.92% minority stake in EuroClear. David has continued to develop in EuroClear, with a seat on the Board. The acquisition further strengthened the strong relationships with shareholders, as reflected by the positive market existing commercial relationships between the two businesses, to the benefit support for Group development and acquisitions. of our respective customers. The Committee recognises that there is further work to be done in improving David has continued to build strong relationships with key regulators and diversity in the leadership positions within our Finance function. government officials in the major territories where the Group operates and carefully navigated the regulatory landscape and stakeholder engagement Executive Director, CEO of Borsa Italiana & Director of Capital Markets during a period of macroeconomic and political uncertainty, ensuring the Group In addition to his responsibilities as an Executive Director for the Group, Raffaele was well prepared for any outcome related to the UK’s exit from the European Jerusalmi has led the Group’s Capital Markets division and Post Trade division in Union. He has carefully managed complex change projects while minimising the Italy. Both segments have grown revenue against a challenging macroeconomic impact to customers, markets or revenue streams, such as the formation of a backdrop and low levels of volatility. Raffaele has continued to promote Group Post Trade division that combines our leading clearing and settlement innovation through new initiatives. businesses with regulatory reporting services. This will enable LSEG to drive further collaboration and innovation for our customers, while continuing to The Group welcomed 109 companies to our markets in the year, raising a operate on an Open Access basis and maintaining local governance and combined total of £23.4 billion (2018: £28.7 billion) in new and further issues. regulatory oversight. This is a good performance against a backdrop of significant levels of uncertainty in our key UK market, which has required significant engagement with key David has led and been a visible role model for the greater focus on culture and stakeholders. Over a third of the £6.9 billion total capital raised by investment behaviour for the Group and has demonstrated strong core leadership values as funds through IPOs and further issues this year has been raised by green funds. well as the importance of the principles of collaboration, innovation and integrated Borsa Italiana’s third Italian Sustainability Day welcomed a record number of execution for the Group. Under David’s direction, LSEG has taken a number of participants amidst the growing focus on sustainable investment. steps to help us achieve our culture goals, including: the launch of our global Inclusion Network; our leadership teams have continued to receive development Other notable achievements in 2019 include: Borsa Italiana welcoming Nexi in over the year; and the 360° feedback process has been successfully embedded April 2019, the largest IPO in Europe for money raised last year; Huatai Securities across our leadership team. was welcomed as the first issuer of GDRs on Shanghai-London Stock Connect in June, a significant achievement in our relationship with China; and the acquisition of a minority stake in Nivaura, supporting capital markets innovation through the use of emerging technologies.

London Stock Exchange Group plc Annual Report 31 December 2019 117 Directors’ Remuneration Report (continued) Annual Report on Remuneration

Based on the above context and an assessment of individual performance, the Remuneration Committee awarded bonuses to each of the Executive Directors as follows:

Executive Director, CEO of Borsa Italiana & Director of Role Chief Executive Officer Chief Financial Officer Capital Markets Bonus for FY2019 % of salary 169% of salary 146% of salary 128% of salary % of maximum 75% 73% 64% £ total amount £1,310,000 £732,000 €670,0001 Of which 50% is deferred £655,000 £366,000 €335,000 Bonus Component Financial Performance (60%) 63% of maximum 63% of maximum 63% of maximum Strategic Deliverables (20%) 87.5% of maximum 87.5% of maximum 87.5% of maximum Personal/ Divisional Objectives (20%) 100% of maximum 90% of maximum 60% of maximum 1. Incorporates an adjustment to the formulaic bonus outcome of Mr Jerusalmi, in light of the technology outage in LSE plc in August 2019 when he was Director of Capital Markets. Compulsory deferral under existing Remuneration Policy Executive Directors must compulsorily defer 50% of their bonus into shares. In relation to performance year 2019 deferral is for a period of two years except for the CEO who, under the terms of his appointment, must defer for a period of three years. For performance year 2020 onwards, in accordance with the enhancements made under our revised policy, Executive Directors must compulsorily defer 50% of their bonus into shares for a period of three years. Dividend equivalents will be paid in respect of deferred shares on vesting.

Awards granted in March 2016 with a performance period ending in FY2019 The performance period for the absolute TSR element of the Performance Share awards ended in March 2019. The awards granted in 2016 were based on absolute TSR performance in the 3 years from grant, and adjusted EPS performance in the 36-month performance period to December 2018. Over the period, annualised absolute TSR performance in the 3 years to March 2019 was 23% per annum and therefore vested at 100% for this element. The Company also delivered average adjusted EPS growth of 1.3% per annum over the performance period and therefore vested at 79.2%. The vesting price as at 17 March 2019 was £47.50.

Awards granted in March 2017 with a performance period ending in FY2020 The value shown in the single figure table on page 114 for the financial year ending December 2019 represents the estimated value of the 2017 awards which will vest in March 2020. The estimate is based on the confirmed 100% vesting of the EPS element and forecast 100% vesting of the TSR element, which will be confirmed in April 2020. The estimated value is based on the average share price in the final 3 months of the financial year. The Committee does not intend to amend the outcome or make any adjustments in regard to share price growth over the period, on the basis that this vesting reflects our view of the Group’s underlying performance and returns for shareholders over the performance period.

The final vesting outcome (including the actual share price at vesting) following the end of the performance period will be disclosed in the next Annual Report on Remuneration covering FY2020.

The performance conditions applying to awards granted in March 2017 are as follows:

TSR element (50%) Proportion of relevant EPS element (50%) – average adjusted EPS growth – absolute TSR growth element which vests Less than 6% p.a. Less than 6% p.a. 0% 6% p.a. 6% p.a. 25% 12% p.a. or more 14% p.a. or more 100% Straight-line pro-rating applies between these points

LTIP Awards Granted in FY2019 (Audited) Awards during FY2019 were granted in March under the LTIP and were made with a value of 300% of salary for David Schwimmer, 275% of salary for David Warren and 250% of salary for Raffaele Jerusalmi (at rate of £1 = €1.17). The same EPS and TSR performance conditions and vesting schedules described above for 2017 awards also apply to these 2019 awards.

Executive Director, CEO of Borsa Italiana & Chief Executive Officer Chief Financial Officer Director of Capital Markets 2014 LTIP (Nil-cost % of salary 300% of salary 275% of salary 250% of salary performance options) granted on 22 March 20192 £1,120,933 (being sterling equivalent of €1,312,500 Face value £2,325,000 £1,375,000 on date of grant) Share price1 £46.42 £46.42 £46.42 Number of LTIP shares granted 50,086 29,620 24,147 1. The share price of £46.42 was determined using the closing price (MMQ) on 21 March 2019 as approved by the Share Scheme Committee (a sub-committee of the Remuneration Committee). 2. TSR is measured over a 2 month trailing average at the start and end of the 3-year performance period which will end on 21 March 2022. EPS is measured over three financial years ending 31 December 2021 and compared to the FY2018 baseline.

London Stock Exchange Group plc 118 Annual Report 31 December 2019 Governance Directors’ Remuneration Report

Other share plans (SAYE, SharePurchase) The Committee has decided not to increase the salaries of Mr Warren, Chief All UK employees, including Executive Directors, are eligible to participate in the Financial Officer, who has stated his intention to retire from the company by the HM Revenue & Customs tax-favoured Save As You Earn Scheme (SAYE). Under the end of 2020, or Mr Jerusalmi, Chief Executive Officer of Borsa Italiana. rules of the SAYE, participants can save up to £500 each month, for a period of three years. At the end of the saving period, savings may be used to acquire Base salaries effective from 1 April 2020, are set out in the table below: ordinary shares by exercising the related option. With effect from With effect from Annual salary 1 April 2019 1 April 2020 The options may be granted at an exercise price which represents a discount of David Schwimmer £775,000 £800,000 (+3%) up to 20% to market value at the date of invitation. No performance conditions David Warren £500,000 £500,000 (+0%) are attached to SAYE options. There is also an International Sharesave Plan (ISP), Raffaele Jerusalmi €525,000 €525,000 (+0%) which is designed to provide share options to Group employees, including Executive Directors, who are not based in the UK on similar terms to the options Given the transformative nature of the proposed transaction with Refinitiv, the that are available to UK employees through the SAYE. Employees in France, Committee will review the CEO’s salary upon completion in the context of the Hong Kong, Italy, Malaysia, Sri Lanka and the US participate in the ISP. As a core significantly larger, more international and complex business and the increased component of our employee proposition and benefits offering it acts as a modest responsibilities and demands of the role. Should the transaction complete, the retention tool with 59% of eligible employees participating globally. combined business would be the largest publicly-listed financial markets infrastructure company by revenue globally and would offer significant customer In 2019, we launched SharePurchase to permanent employees in Australia and benefits across the full range of LSEG’s businesses by: extending its trading Romania, with one-third of eligible employees choosing to participate. Under this capabilities across asset classes; expanding its data content, management and plan, colleagues can purchase up to an equivalent of £500 per month of ordinary distribution capabilities; increasing its global footprint and range of customer shares and are then awarded additional shares which vest after the completion of offerings; and enabling LSEG, Refinitiv and their customers to benefit from future a 3 year plan cycle. No performance conditions are attached to the award. data and technology-enabled innovation and growth opportunities. Any increase would be effective from 2021 and presented to shareholders in next year’s report. Share plan rules and approvals We are seeking shareholder approval for our Deferred Bonus Plan at our Pension operation: forthcoming AGM, reflecting our continued commitment to alignment with The Committee has extensively reviewed the new principles of the UK Corporate shareholder interests through employee share ownership. Formal approval of the Governance Code, including in relation to pensions. The average LSEG employer plan and its rules is being sought in connection with the extension of mandatory contribution for UK employees is 11% of salary and we will reduce pension deferral of a portion of bonus into shares beyond the Executive Directors and contributions for new Executive Directors to 10% of salary in line with the wider Executive Committee to senior management across our business for workforce in our revised policy. performance year 2020 onwards. The CEO’s pension contribution will be reduced from 15% to 10% of salary Implementation of the Remuneration Policy during 2020 from April 2020. (1 January 2020 to 31 December 2020) Base salary operation: The Committee do not intend to amend the contribution for the CFO, who has stated During the year, the Committee conducted its annual review of the base salary his intention to retire from the company by the end of 2020, nor the CEO of Borsa levels of our Executive Directors. Italiana, who accrues mandatory state pension benefits in Italy. This arrangement will continue to apply going forward irrespective of the new policy limits. The Committee has decided to increase Mr Schwimmer’s base salary for his role as CEO to £800,000. This increase, effective April 2020, is considered appropriate in recognition of Mr Schwimmer’s performance and development since joining the Group as well as the scale, scope and responsibilities of his role.

At the time of Mr Schwimmer’s appointment as CEO, the Committee set his base salary at a level below the previous incumbent to reflect that this was his first CEO role. Since joining, Mr Schwimmer has established himself successfully, demonstrating strong core leadership values and role-modelling the desired culture and behaviours of the Group. Under his leadership, the Group has produced strong financial and strategic results and has grown to become a far larger business with a broader scope of products and services.

London Stock Exchange Group plc Annual Report 31 December 2019 119 Directors’ Remuneration Report (continued) Annual Report on Remuneration

Annual bonus operation: The Committee has given extensive consideration to the LTIP metrics and target ––As per prior years, for FY2020 the Group bonus pool will be determined based ranges, and sought the views of shareholders and shareholder governance bodies on performance measures weighted 60% Group AOP and 40% strategic during the year. Relative TSR provides strong alignment with our long-term deliverables to be assessed over a 12-month performance period. strategy and aligns to the market-standard approach. We carried out a comprehensive review to determine the best comparator group for the relative ––For FY2020, the ‘strategic’ element will incorporate sustainability initiatives, TSR measure and deemed the FTSE100 index to be the most appropriate reflecting our commitment to ensure the long-term viability of the Group comparator sector at this time. The FTSE100 index provides a broad range of through managing our environmental and social impacts and practicing firms across all sectors with a similar size and complexity to LSEG. Given current good governance. corporate activities at LSEG, we will keep our comparator group and LTIP metrics ––The Executive Directors’ awards are funded from the Group bonus pool. As per more broadly under review to ensure they remain appropriate for future awards. 2019, the performance of the Executive Directors and Group Executive team is Any adjustments that are deemed appropriate by the Committee will be made in assessed as part of a scorecard. This scorecard aligns the bonus assessment line with the revised policy. with the construct of the Group bonus pool: 60% against Group AOP; 40% against strategic deliverables. The ‘strategic’ element includes key Group The Committee will continue to review the LTIP measures, weightings and targets strategic initiatives as well as personal and divisional objectives. on an annual basis, to ensure their continued suitability and to ensure they are stretching both for LSEG as a standalone company and the combined business ––Further to our commitment to ensure a greater focus on the development of should the transaction complete. culture for the Group, the Committee determined that within this scorecard there should be a greater proportion assessing behavioural performance, to Awards to be made during 2020 allow for a stronger emphasis on how the individuals achieved their targets. Based on the context and an assessment of individual performance, the A 360° feedback process informs part of the assessment of the personal Remuneration Committee intends to make grants to each of the Executive element of the scorecard. Directors under the 2014 LTIP as set out below.

––50% of any bonus payment for Executive Directors and the Group Executive Executive team will be paid in March 2020. The remaining 50% will be deferred into Director, CEO of shares for a period of three years. Borsa Italiana & Chief Executive Chief Director of Capital Role ––Deferred awards are subject to malus and clawback provisions (e.g. in cases of Officer Financial Officer Markets material misstatement. gross misconduct, misbehaviour or material failure of 2020 % of salary 300% of salary 0% of salary 200% of salary LTIP award risk management) with judgement applied by the Committee. Sterling equivalent (subject to of €1,050,000 performance) ––For good leavers, awards will usually vest at the normal vesting date and in full, (at prevailing FX unless the Committee determines to scale back the award based on any factors rate at time of Amount £2,400,000 £01 grant) deemed relevant. Where an individual is not considered to be a good leaver, 1. No LTIP award will be granted to Mr Warren, who has stated his intention to retire from the unvested awards will lapse. company by the end of 2020. ––The implementation of the scorecard for the Group Executive team and Shareholding requirements extension of the bonus deferral scheme below Group Executive level to the The minimum shareholding requirement for Executive Directors is 3x base salary Managing Director population provides greater alignment with the Executive and 2x base salary for the Group Executive team. Executive Directors will also be Directors. In addition, it is in accordance with the revised UK Corporate required to hold the lower of their actual shareholding and 100% of their MSR for Governance Code which calls for remuneration committees to determine two years post-departure. remuneration for ‘senior management’ and to more closely align incentives with culture. Non-Executive Directors’ fees for 2020 Long Term Incentive Plan: The Committee reviewed Non-Executive Director fees during 2019. The base fee Awards are intended to be made in 2020 under the 2014 LTIP in line with our was last revised in 2018. To reflect the increased scope, time commitment and revised Remuneration Policy. The 2020 LTIP awards will be subject to a two year complexity of Non-Executive Director and Senior Independent Director roles, the holding period in addition to the three year vesting period, resulting in a total five base fee and Senior Independent Director fee has been increased, with effect year period from the date of grant. from 1 January 2020.

Malus and clawback provisions will apply to these awards, allowing the The fee schedule for 2020 is therefore as follows: Committee to reduce subsisting awards for Executive Directors or request the With effect from With effect from refund of already paid or vested awards in certain circumstances (e.g. material Fees 1 May 20191 1 Jan 2020 misstatement, gross misconduct, misbehaviour or material failure in risk Group Chair £525,000 £525,000 management). The 2020 awards will vest three years after the grant date subject Senior Independent Director £145,000 £150,000 to relative TSR and adjusted EPS performance measures as follows: Non-Executive Director base fee (inclusive of Committee EPS element (60%) – memberships) £75,000 £80,000 average adjusted EPS TSR element (40%) Proportion of relevant Audit / Remuneration / Risk growth – relative TSR growth element which vests Committee Chair £30,000 £30,000 Less than 6% p.a. Less than median 0% 1. Non-Executive Director fees were last revised with effect from 1 January 2018. The Group Chair’s 6% p.a. Median ranking 25% fee was set at £525,000 from his appointment to the role on 1 May 2019. 12% p.a. or more Upper quartile ranking 100% Non-Executive Directors will also be required to build up a shareholding requirement Straight-line pro-rating applies between these points of 1x basic annual fees, to be built up within three years of appointment.

London Stock Exchange Group plc 120 Annual Report 31 December 2019 Governance Directors’ Remuneration Report

Non-Executive Directors’ Remuneration Travel and other appropriate expenses with associated taxes (including fees Non-Executive Directors’ remuneration is determined by the Board and is incurred in obtaining professional advice) incurred in the course of performing neither performance-related nor pensionable. The Chair’s fee is determined by their duties are reimbursed to the Chair and to the Non-Executive Directors. the Remuneration Committee. The fees for Non-Executive Directors are set at a level which is intended to recognise the significant responsibilities of Directors The Chair and the Non-Executive Directors do not participate in any of the and to attract individuals with the necessary experience and ability to make an Company’s annual bonus or LTIP plans and are not entitled to any payments important contribution to the Company’s affairs. Comparisons are made with on termination. fees paid at FTSE 100 companies. Certain Non-Executive Directors are entitled to receive fees from subsidiary A travel allowance of £4,000 per intercontinental trip will be introduced for companies, details of which are set out below. Non-Executive Directors to reflect the global nature of the company’s business and the additional time commitment required for travel. The Group Chair will not be eligible for this allowance as he receives an all-inclusive fee for his role.

The original date of appointment as Directors of the Company is as follows:

Date of Date letter of Time to Date of LSEG Committee Other subsidiaries/ Name Appointed appointment expiry Notice period resignation membership/chairmanship committees Paul Heiden 04/06/2010 04/06/2019 End of AGM None SID, Audit Chair, 2020 Nomination, Risk Jacques Aigrain 01/05/2013 01/05/2019 30/04/2022 None Audit, Nomination, LCH (Remuneration Remuneration Chair Committee) Stephen O’Connor 12/06/2013 12/06/2019 11/06/2022 None Audit, Nomination, LSE plc Risk Chair Professor Andrea Sironi 01/10/2016 01/10/2019 30/09/2022 None Risk, Borsa Italiana Chair, LSEGH Nomination Italia Chair Dr. Val Rahmani 20/12/2017 20/12/2017 19/12/2020 None Risk, Nomination, Remuneration Marshall Bailey 25/09/2018 25/09/2018 24/09/2021 None Nomination, LCH Group Chair Remuneration Dr. Ruth Wandhöfer 22/10/2018 22/10/2018 21/10/2021 None Audit, Nomination, Risk Professor Kathleen DeRose 28/12/2018 28/12/2018 27/12/2021 None Audit, Nomination, Risk Don Robert 01/01/2019 01/01/2019 01/01/2022 6 months Group Chair, Nomination LSE plc Chair as Director, Chair, Remuneration 01/05/2019 as Chair Cressida Hogg 08/03/2019 08/03/2019 07/03/2022 None Nomination, Remuneration Directors who stood down from the Board during the Year: Sir Donald Brydon CBE 19/06/2015 19/06/2015 End of AGM 6 months 01/05/2019 Group Chair, LSE plc Chair as Director; 2019 Nomination Chair, 01/07/2015 Remuneration as Chair

London Stock Exchange Group plc Annual Report 31 December 2019 121 Directors’ Remuneration Report (continued) Annual Report on Remuneration

Non-Executive Directors’ Remuneration Table (Audited)

FY2019 FY2018 FY2019 FY2019 FY2019 Taxable FY2019 FY2018 FY2018 FY2018 Taxable FY2018 LSEG Fees Other Fees1 Total Fees benefits2 Total LSEG Fees Other Fees1 Total Fees benefits2 Total £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Paul Heiden 145 – 145 17 162 145 – 145 18 163 Jacques Aigrain 105 5 110 6 116 105 5 110 10 120 Stephen O’Connor 105 – 105 – 105 105 – 105 – 105 Professor Andrea Sironi3 75 140 215 7 223 75 142 217 12 228 Dr. Val Rahmani 75 – 75 48 123 75 – 75 34 109 Marshall Bailey 75 225 300 – 300 20 60 80 – 80 Dr. Ruth Wandhöfer 75 – 75 1 76 15 – 15 – 15 Professor Kathleen DeRose4 76 – 76 38 113 – – – – – Don Robert 375 – 375 46 421 – – – – – Cressida Hogg 61 – 61 – 61 – – – – – Directors who stood down from the Board during the year: Sir Donald Brydon CBE 135 – 135 – 135 400 – 400 1 401 Total Non-Executive Directors’ fees 1,301 370 1,672 162 1,834 1,151 427 1,578 221 1,799 1. Other fees relate to subsidiaries and other committees. 2. Taxable benefits relate to travelling expenses, including grossed up taxes where applicable. 3. Professor Andrea Sironi received a combined annualised fee of €160,000 (£140,351) for his roles as Chair and Director of Borsa Italiana and Chair and Director of LSEGH Italia. 4. Professor Kathleen DeRose received an additional payment in 2019 from her appointment on 28 December 2018.

London Stock Exchange Group plc 122 Annual Report 31 December 2019 Governance Directors’ Remuneration Report

Outside appointments Historic levels of CEO pay

Executive Directors are allowed to accept appointments as Non-Executive Long-term Directors of other companies with the prior approval of the Chair. Approval will Annual incentive only be given where the appointment does not represent a conflict of interest bonus payout vesting rates CEO Single against against with the Company’s activities and where the wider exposure gained will be Period ended: total figure of maximum maximum beneficial to the development of the individual. Executive Directors may retain (12 months unless remuneration opportunity opportunity otherwise stated) CEO £000 % % fees to encourage them to seek out the development opportunities and valuable David experience afforded by these appointments and in recognition of the personal 31 December 2019 Schwimmer 2,456 75% –5 responsibility Executives assume in such roles and we would disclose these fees. David 31 December 2018 Schwimmer1 2,153 76% –5 At present, none of the Executive Directors are in receipt of additional fees. 29 November 2017 Xavier Rolet2 5,7994 79% 100% 31 December 2016 Xavier Rolet 6,880 91% 91% No payments were made for loss of office during the year and no payments were 31 December 2015 Xavier Rolet 6,526 95% 94% made to past directors. 9 months ended 31 December 2014 Xavier Rolet 4,587 89% 50% Alignment between pay and performance 31 March 2014 Xavier Rolet 6,383 93% 100% Total Shareholder Return (TSR) performance 31 March 2013 Xavier Rolet 6,015 89% 100% The following graph shows, for the financial period ended 31 December 2019 and for each of the previous ten financial periods, the TSR on a holding of the 31 March 2012 Xavier Rolet 5,245 100% 65% Company’s ordinary shares of the same kind and number as those by reference 31 March 2011 Xavier Rolet 2,134 89% – to which the FTSE 100 is calculated. The TSR graph represents the value, at 31 March 2010 Xavier Rolet 1,873 71% – 31 December 2019, of £100 invested in London Stock Exchange Group plc on Clara Furse3 400 49% 0% 31 March 2010, compared with the value of £100 invested in the FTSE 100 Index 1. David Schwimmer was appointed as CEO on 1 August 2018 and his data is as per the Single total over the same period. As a member of the FTSE 100, we have chosen the FTSE figure table. David Warren operated as interim CEO from 29 November 2017 until 1 August 2018 and his data is shown in the Single total figure table 100 Index as it is currently the most relevant index for benchmarking our 2. Xavier Rolet was in the role of CEO from 20 May 2009, appointed to the Board 16 March 2009 until performance over the ten financial periods. he stepped down on 29 November 2017; data therefore represents 11-month figures 3. Clara Furse was in the role of CEO until 20 May 2009. She resigned from the Board on 15 July 2009. 4. Value shown for the period ended 29 November 2017 represents the actual vesting of the LTIP TSR chart v FTSE 100 over 10 ﬁnancial periods award granted in 2015, that vested on 3 April 2018 (91,949 shares at £40.86). An award also vested on 10 March 2018 over 27,874 shares previously granted under the LSEG Deferred Bonus Plan Total Return rebased Apr-10 = 100 5. Forecast for LTIP awards to vest in April 2020 is 100%. This grant is not applicable to 1400 David Schwimmer 1200 1000 800 600 400 200 0 Mar Mar Mar Mar Dec Dec Dec Dec Dec Dec 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

LSEG FTSE 100

London Stock Exchange Group plc Annual Report 31 December 2019 123 Directors’ Remuneration Report (continued) Annual Report on Remuneration

CEO to employee pay ratio (Audited) Notes to the calculation: Paying our employees fairly relative to their role, skills, experience and ––We have chosen to use Option C in the regulations to determine the pay ratios. performance is central to our approach to remuneration, and our reward The best equivalents for the UK employees at the 25th, 50th and 75th framework and policies support us in doing this. The Committee consider pay percentiles were determined using the hourly rate from our additional gender ratios as a useful reference point to inform pay decisions, but also take into pay disclosure, which goes beyond the UK statutory disclosure requirements. account a number of other internal and external factors when determining This option leverages the comprehensive analysis we have completed as part of executive pay outcomes, including: our UK gender pay gap reporting exercise and includes our entire UK population and all compensation awards in the financial year to ensure that ––Our reward framework which establishes the compensation structure, the best equivalents determined are a fair and true representation of elements and leverage for each career stage in the organisation, providing workforce pay at the relevant percentiles. Further information on our the Committee with oversight of workforce remuneration; additional gender pay disclosure is provided in our Gender Pay Report which ––The Group’s financial and strategic performance, including consideration is available at: www.lseg.com. of risk; ––The 2019 total pay and benefits of the identified employees was determined ––Each individual’s performance, including conduct and behaviour, against based on data as at 31 December 2019. personal objectives; ––The 2019 total pay and benefits for the 25th, 50th and 75th percentile ––External market surveys; and employees are as follows: £79,292, £114,401, £128,917. ––Wider context and the views of shareholders and investor bodies. ––The 2019 base salary for the 25th, 50th and 75th percentile employees are as follows: £51,600, £85,750, £92,363. The table below shows the ratios of the CEO single total figure of remuneration (as disclosed on page 114) to the total pay and benefits of UK employees at the Percentage change in remuneration of CEO and employees 25th, 50th and 75th percentile. The table below shows the percentage year-on-year change in salary, benefits

25th 50th 75th and annual bonus for the CEO compared to the average of the representative percentile percentile percentile sample of UK employees (all LSEG UK employees). Where appropriate, amounts Year Method pay ratio pay ratio pay ratio have been annualised to provide a like-for-like comparison. 2019 C 31:1 21:1 19:1 Salary Benefits Annual Bonus % % % The Committee has reviewed the ratios and pay data for the individuals identified Executive Directors at each of the relevant quartiles and believe they are a fair reflection of the CEO 0% 6%2 -1% company’s wider pay policies. The remuneration received by each of each of the Average pay of Group UK employees1 2.5% 1% -4% individuals is in line with our reward framework. Executive Directors’ and other Notes: senior managers’ remuneration include a greater proportion of performance 1. This group has been selected to reflect the jurisdiction in which the CEO is based related pay when compared to the identified employees. The Committee 2. This data refers to the CEO’s core UK benefits to provide a like-for-like comparison, plus taxable considers this is essential to differentiate levels of responsibility and align pay expenses and reflects the reduced pension and benefits allowances now applicable; it excludes expatriate allowances, which are of a finite duration, and one-off costs to sustainable long-term performance and shareholders’ interests. Relative importance of spend on pay Mr Schwimmer was first granted an LTIP award in August 2018 following his The table below shows the relative FY2019 versus FY2018 expenditure of the appointment as CEO and has therefore not exercised any LTIPs in respect of Group on Dividends versus Total Employee Costs. These figures are underpinned 2019. Next year, given that the performance period of his first LTIP award will be by amounts from the Notes to the Financial Statements at the back of this report. substantially completed, we expect that the pay ratio will be higher. As a Annual significant proportion of the CEO’s remuneration is linked to performance and FY2019 FY2018 Increase Year-on-year increases (%) share price over the longer-term, it is expected that annual changes in the pay £m £m % Dividends Paid In Financial Period £221m £189m +17% ratio will be significantly influenced by LTIP outcomes each year and will fluctuate accordingly. It is expected that the first LTIP award vesting to the Total Employee Costs £529m £510m +4% CEO will be in 2021. Relative importance of spend on pay £m

600 +4%

500 510 529 400 300 +17% 200 221 189 100 0 2018 2019 2018 2019 Dividends Paid in Financial Period Total Employee Costs

London Stock Exchange Group plc 124 Annual Report 31 December 2019 Governance Directors’ Remuneration Report

Statement of Directors’ shareholdings and share interests as at 31 December 2019 (Audited) David Warren and Raffaele Jerusalmi currently own shares outright and at a level exceeding their revised minimum required shareholding of 3x base salary based on a share price of £77.50 (being the closing share price on 31 December 2019). Current shareholdings are summarised in the following table:

Shares held Options held1 Shareholding Unvested and Unvested and as at subject to subject Vested 31 December Owned performance to continued but not Requirement 2019 Requirement Outright conditions employment2 exercised (% salary) (% salary)3 met Executive Directors David Schwimmer – 101,308 5,945 – 300 32 N/A4 David Warren 122,541 110,892 19,705 – 300 2,061 Yes Raffaele Jerusalmi5 52,130 91,980 7,101 – 300 943 Yes Non-Executive Directors Paul Heiden 3,818 – – – – – N/A Jacques Aigrain 1,400 – – – – – N/A Stephen O’Connor – – – – – – N/A Professor Andrea Sironi – – – – – – N/A Dr. Val Rahmani – – – – – – N/A Marshall Bailey OBE – – – – – – N/A Dr. Ruth Wandhöfer – – – – – – N/A Professor Kathleen DeRose – – – – – – N/A Don Robert 10,000 – – – – – Cressida Hogg – – – – – – N/A Directors who stood down from the Board during the year: Sir Donald Brydon CBE6 5,000 – – – – – N/A 1. No options were exercised by the Directors during the year to 31 December 2019. 4. MSR required to be reached within five years of appointment – 1 August 2023. 2. Refers to Deferred Bonus Plan and SAYE. 5. FY2019 rate of £1 = €1.14. 3. Includes shares held outright plus, on a ‘net of expected taxes’ basis, share options awarded 6. Shareholding as at 1 May 2019. under the DBP that are unvested and subject to continued employment. Note: There have been no further changes in these interests between 31 December 2019 and 28 February 2020.

Directors’ Interests in Ordinary Shares – Beneficial, Family and any Connected Persons Interests (Audited)

Ordinary Options with Options without Shares Held performance conditions1 performance conditions2,3 Total Interests 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 2019 2018 2019 2018 2019 2018 2019 2018 Executive Directors David Schwimmer – – 101,308 51,222 5,945 – 107,253 51,222 David Warren 122,541 94,329 110,892 125,827 19,705 23,063 253,138 243,219 Raffaele Jerusalmi4 52,130 52,130 91,980 105,693 7,101 – 151,211 157,823 Non-Executive Directors Paul Heiden 3,818 3,818 – – 3,818 – 3,818 3,818 Jacques Aigrain 1,400 – – – – – 1,400 – Stephen O’Connor – – – – – – – – Professor Andrea Sironi – – – – – – – – Dr. Val Rahmani – – – – – – – – Marshall Bailey – – – – – – – – Dr. Ruth Wandhöfer – – – – – – – – Professor Kathleen DeRose – – – – – – – – Don Robert 10,000 – – – – – 10,000 – Cressida Hogg – – Directors who stood down from the Board during the year: Sir Donald Brydon CBE5 5,000 5,000 – – – – 5,000 5,000 1. LTIP Performance shares are structured as nil-cost options. 5. Shareholding as at 1 May 2019. 2. Unvested awards in the Deferred Bonus Plan and share options granted under SAYE. Note: There have been no further changes in these interests between 31 December 2019 and 28 February 2020. 3. Deferred Bonus Plan shares are structured as nil-cost options subject to continued employment and malus and clawback provisions. 4. Raffaele Jerusalmi elected to defer his €415,000 Deferred Bonus Plan award for FY2017 into cash.

London Stock Exchange Group plc Annual Report 31 December 2019 125 Directors’ Remuneration Report (continued) Annual Report on Remuneration

Long Term Incentive Plan table The 2014 Long Term Incentive Plan has one element applicable to Executive Directors, a conditional award of Performance shares.

The awards are dependent on Absolute TSR performance for 50% of the award, with the remaining 50% dependent on an Adjusted EPS growth target. Details of performance conditions are set out on page 118.

The table below sets out the Executive Directors’ Long Term Incentive Plan awards (including the exercise of vested shares in FY2019), as at 31 December 2019.

Number of shares

Price at Price at Value at Price at Value at award Award Vested Lapsed vesting vesting exercise exercise date At start during during during At end date date Exercise date3 date Date of award (£) of year the year year year of year Vesting date (£) (£) date (£) (£) Comment David Schwimmer 08/08/2018 45.39 51,222 – – – 51,222 08/08/2021 – – – – – –

22/03/2019 46.42 50,086 50,086 22/03/2022

51,222 50,086 – – 101,308 – – – – – – –

David Warren 17/03/2016 28.70 44,555 – 39,922 4,633 – 17/03/20192 47.50 1,896,295 17/04/2018 48.003 1,916,432 FY2019 Actual

03/04/2017 31.71 46,168 – – – 46,168 03/04/2020 71.01 3,278,390 – – – FY2020 Estimate1

26/04/2018 42.73 35,104 – – – 35,104 26/04/2021 – – – – –

22/03/2019 46.42 – 29,620 – – 29,620 22/03/2022 – – – – –

125,827 29,620 39,922 4,633 110,892 – – 1,896,295 – – 1,916,432 FY2019 Actual

3,278,390 FY2020 Estimate1 Raffaele Jerusalmi 17/03/2016 28.70 37,860 – 33,923 3,937 – 17/03/20192 47.50 1,611,343 17/04/2018 48.003 1,628,453 FY2019 Actual

03/04/2017 31.71 38,288 – – – 38,288 03/04/2020 71.01 2,718,831 – – – FY2020 Estimate1

26/04/2018 42.73 29,545 – – – 29,545 26/04/2021 – – – – –

22/03/2019 46.42 – 24,147 – – 24,147 22/03/2022 – – – – –

105,693 24,147 33,923 3,937 91,980 – – 1,611,343 – – 1,628,453 FY2019 Actual

2,718,831 FY2020 Estimate1 1. FY2020 Estimate: Average share price for the last 3 months of the financial year with vesting forecast at 100 per cent. 2. Vesting of shares granted on 17 March 2016 at actual vesting price of £47.50. 3. Price achieved = £48.0044. All estimates are shown separately in bold. They will be fully disclosed in next year’s Annual Report on Remuneration.

London Stock Exchange Group plc 126 Annual Report 31 December 2019 Governance Directors’ Remuneration Report

Remuneration Committee – Governance The Remuneration Committee is appointed by the Board and comprises the Chair and four independent Non-Executive Directors. The Committee’s remit includes the remuneration of the Chair of the Group, Executive Directors and Senior Management, as well as overseeing arrangements for all employees. Please see pages 24–25 for details of the Group’s Executive Committee.

Details of the Committee’s remit and activities are set out in this Directors’ Remuneration Report. The Committee has written terms of reference which are available from the Group Company Secretary or at the corporate governance section of the Company’s website at www.lseg.com/about-london-stock-exchange-group/ corporate-sustainability/governance

During the financial period ending 31 December 2019, the Committee held 4 scheduled meetings and 2 additional meetings. The additional meetings were focused on M&A activity, key management appointments relating to succession planning and malus and clawback considerations.

Here is a summary of the items they discussed: Routine Non-Routine February 2019 ––Governance update ––Malus and clawback ––FY2018 Performance and Bonus approval 2 meetings were held during this month ––FY2019 Bonus considerations ––FY2019 LTIP grants and anticipated vesting of previous LTIP and DBP schemes ––Performance and determination of CEO and Group Executives’ remuneration ––FY2018 Directors’ Remuneration Report ––Gender pay reporting and disclosure ––LCH Remuneration Committee proposals June 2019 ––Governance update ––Remuneration Policy ––FY2018 Directors’ Remuneration Report – Shareholder feedback ––FY2019 Performance and Bonus update ––FY2019 LTIP grants and anticipated vesting of previous LTIP and DBP schemes ––Regulatory update ––Gender pay update ––LCH Remuneration Committee updates ––FY2019 Remuneration Committee calendar July 2019 ––N/A ––Succession planning ––M&A activity (Refinitiv) October 2019 ––FY2019 Performance and Bonus update ––Remuneration Policy ––Anticipated vesting of previous LTIP and DBP schemes ––Reward framework ––LCH Remuneration Committee updates ––M&A activity (Refinitiv) ––FY2019 Remuneration Committee calendar December 2019 ––Governance update ––Remuneration Policy ––FY2019 Directors’ Remuneration Report key themes ––M&A activity (Refinitiv) ––FY2019 Performance and Bonus update ––Succession planning ––FY2020 Bonus considerations ––FY2020 LTIP grants and anticipated vesting of previous LTIP and DBP schemes ––2020 salary review ––LCH Remuneration Committee updates ––FY2019 Remuneration Committee calendar February 2020 ––FY2019 Performance and Bonus approval ––Remuneration Policy ––FY2020 LTIP grants and anticipated vesting of previous ––M&A activity (Refinitiv) Meetings which took place LTIP and DBP schemes during FY2020 will be repeated in next year’s report. ––Performance and determination of CEO and Group Executives’ remuneration ––FY2019 Directors’ Remuneration Report ––Gender pay reporting and disclosure ––LCH Remuneration Committee proposals

To assist the Committee, the results of market surveys are made available. Where appropriate, the Committee invites the views of the Chief Executive Officer, Chief Financial Officer, Group Head of Human Resources and the Chief Risk Officer via the Risk Committee. None of these individuals nor the Chair participated in any discussion relating to their own remuneration.

London Stock Exchange Group plc Annual Report 31 December 2019 127 Directors’ Remuneration Report (continued) Annual Report on Remuneration

Statement of shareholder voting The table below sets out the results of the advisory vote on the Directors’ Remuneration Report at the 2019 AGM and the binding vote on the Remuneration Policy Report at the 2017 AGM.

Votes for Votes against Votes Number % Number % Votes cast withheld Remuneration Policy Report (2017 AGM) 252,081,916 98.48 3,886,744 1.52 255,968,660 6,200,579 Annual Report on Remuneration (2019 AGM) 277,931,612 96.70 9,475,798 3.30 287,407,410 26,188

Advisors During the year, Deloitte LLP received £197,090 (excluding VAT) based on actual The Remuneration Committee continues to be mindful of recommendations time spent for these services. In addition, Deloitte received £44,810 (excluding from key stakeholders, including institutional investor bodies. The Committee VAT) at the beginning of the year for advice related to the potential transaction consults with major shareholders on any key decisions taken. with Refinitiv. Separately, other parts of Deloitte LLP also advised the Company during 2019 in relation to tax, internal audit, consulting and transaction support Deloitte LLP is the principal advisor appointed by the Committee to provide services. Deloitte is a founder member of the Remuneration Consultants Group independent advice on executive remuneration policy and practice, and reviews and, as such, voluntarily operates under the code of conduct in relation to the implementation of our approved policy against current and emerging executive remuneration consulting in the UK. The Committee is satisfied that corporate governance best practice. During 2015, the Committee undertook a the advice provided by Deloitte LLP is independent and objective. competitive tender process for the role of Remuneration Committee advisor and re-appointed Deloitte as its principal advisor with effect from 1 April 2016. Signed on behalf of the Board of Directors

Jacques Aigrain Chair of the Remuneration Committee 28 February 2020

London Stock Exchange Group plc 128 Annual Report 31 December 2019 Governance Directors’ Report Directors’ Report

The Directors of the Company are pleased to present their Annual Share rights Report to shareholders, together with the financial statements for the The rights and obligations attached to the Company’s ordinary shares are set out year ended 31 December 2019 with comparatives for the year ended in the Company’s Articles of Association, copies of which can be obtained from 31 December 2018. Companies House in the UK or by writing to the Group Company Secretary.

The following sections of the Annual Report are incorporated into this Directors’ No shareholder shall be entitled to vote at a general meeting, either in person or Report by reference: by proxy, in respect of any share held by him or her unless all monies presently payable by him or her in respect of that share have been paid. In addition, ––The information that fulfils the requirements of the Strategic Report no shareholder shall be entitled to vote, either in person or by proxy, if he or she (including the Financial Review) can be found on pages 2–73 has been served with a notice under section 793 of the Companies Act 2006 ––Board of Directors on pages 75–77 (concerning interests in those shares) and has failed to supply the Company with the requisite information. Results The Group made a profit before taxation from continuing operations, before Other than restrictions considered to be standard for a UK listed company (for amortisation of purchased intangible assets and non-underlying items for the example, restrictions on partly paid certified shares), there are no limitations on year, of £994 million (2018: £865 million). After taking into account amortisation the holding, transfer or voting rights of ordinary shares in the Company, both of of purchased intangible assets and non-underlying items, the profit of the which are governed and regulated by the Company’s Articles of Association and Group before taxation for the year from continuing operations was £651 million applicable legislation and regulation. The Company is not aware of any (2018: £685 million). Profit after taxation from continuing operations for the year agreements between holders of shares that may result in restrictions on the was £465 million (2018: £553 million). transfer of shares or on voting rights.

Dividends Corporate Governance Statement The Directors are recommending a final dividend for the year of 49.9 pence The Company’s Corporate Governance Report and the reports of the Audit, (2018: 43.2 pence) per share which is expected to be paid on 27 May 2020 to Nomination and Risk Committees are set out on pages 88–97 and are, together shareholders on the register on 1 May 2020. Together with the interim dividend with the information on share rights set out above, incorporated into this of 20.1 pence (2018: 17.2 pence) per share paid in September 2019, this produces Corporate Governance Statement by reference. a total dividend for the period of 70.0 pence (2018: 60.4 pence) per share estimated to amount to £244 million (2018: £211 million). Articles of Association The Company’s Articles of Association may only be amended by special resolution Share capital at a general meeting of the shareholders. The Company’s Articles of Association As at 31 December 2019, the Company had 350,672,122 ordinary shares in contain provisions relating to the appointment and removal of Directors. issue with a nominal value of 679/86 pence each, representing 100% of the total issued share capital. Substantial Shareholders As at 28 February 2020 the Company had been notified of the following interests The Company holds 929,418 of its ordinary shares in Treasury. Therefore, the total amounting to more than 3% in the issued share capital of the Company in number of voting rights in the company is 349,742,704. The figure 349,742,704 accordance with DTR 5 of the FCA’s Disclosure Guidance and Transparency Rules: may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to Qatar Investment Authority 10.3% their interest in, the Company under the FCA’s Disclosure Guidance and Blackrock Inc 6.9% Transparency Rules. The Capital Group Companies, Inc 6.8% Lindsell Train Limited 5.0% During the year, the Company issued 68,020 new ordinary shares and transferred 1,505,267 ordinary shares out of treasury, to settle employee Authority to Issue Shares share scheme awards. Subject to the provisions of the Companies Act 2006 and without prejudice to any rights attached to any existing shares or class of shares, any share may be issued with such rights or restrictions as the Company may by ordinary resolution determine or, subject to and in default of such determination, as the Board shall determine.

Authority to Purchase Shares The authority for the Company to purchase in the market up to 34,956,941 of its ordinary shares (representing 10% of the issued share capital of the Company as at the latest practicable date before publication of the Notice of the Company’s last AGM) granted at the Company’s last AGM, expires on the date of the forthcoming AGM. Shareholders will be asked to give a similar authority to purchase shares at the forthcoming AGM.

London Stock Exchange Group plc Annual Report 31 December 2019 129 Directors’ Report (continued)

Authority to Allot Shares Environment The authority conferred on the Directors at last year’s AGM to allot shares in the We recognise that we must use resources in ways that deliver long-term Company up to a maximum nominal amount of £8,061,775 (representing 33.3% sustainability and profitability for the business and have regard for impact on the of the issued share capital of the Company (excluding treasury shares) as at the environment. We also take such factors into account in developing our products latest practicable date before publication of the Notice of the Company’s last and services. The Group’s primary greenhouse gas (GHG) emissions arise from AGM) or, in connection with a pre-emptive offer to existing shareholders by way energy, waste and water in our offices and data centres around the world, from of a rights issue, up to a maximum nominal amount of £16,123,551 (representing staff travel, and indirectly from our supply chain. We are aware of the risks and 66.6% of the issued share capital of the Company (excluding treasury shares) as opportunities for our business arising from climate change and have developed at the latest practicable date before publication of the Notice of the Company’s measures to address them. We actively monitor these changes so that we can last AGM), expires on the date of the forthcoming AGM. Shareholders will be adapt and respond as necessary. asked to give a similar authority to allot shares at the forthcoming AGM. Further details of our approach to environmental management, our targets and Directors’ interests progress on environmental matters as well as methodology and verification can Directors’ interests in the shares of the Company as at 31 December 2019, be found in supporting sustainable growth on page 47–49. according to the register maintained under the Companies Act 2006, are set out in the Directors’ Remuneration Report on page 125. No company in the Group Political Donations was, during or at the end of the year, party to any contract of significance in During the year the Group did not make any political donations to EU or non-EU which any Director was materially interested. organisations or incur any political expenditure.

Directors’ indemnity It remains the Company’s policy not to make political donations or to incur Details of qualifying third-party indemnity provisions (as defined by section 234 political expenditure; however, the application of the relevant provisions of the of the Companies Act 2006) in force during the course of the year ended 31 Companies Act 2006 is potentially very broad in nature and, as last year, the December 2019 can be found on page 83. Such qualifying third-party indemnity Board is seeking shareholder authority to ensure that the Group does not provisions remain in force as at the date of approving this Directors’ Report. inadvertently breach these provisions as a result of the breadth of its business activities, although the Board has no intention of using this authority. As with Employees previous years the Board is proposing that shareholders pass a resolution at the Information on the Company’s employees including the Company’s approach forthcoming AGM to authorise the Group to: to human rights and diversity; the outcomes relating to the Company’s ––make political donations to political parties and independent election employee engagement survey ‘Have Your Say’ and further examples of candidates not exceeding £100,000 in total employee engagement can be found in the Sustainability section on pages 43–46 and page 80. Information on the Group’s share schemes is provided in ––make political donations to political organisations other than political parties the Directors’ Remuneration Report on pages 98–128 and in the “Rewarding not exceeding £100,000 in total our People” section on page 46. The Company provides an induction ––incur political expenditure not exceeding £100,000 in total, provided that in any programme for new employees, including training employees on health and event the aggregate amount of any such donations and expenditure made or safety and a range of development programmes for all employees to develop incurred by the Group shall not exceed £100,000 their skills and knowledge. Notwithstanding the Company’s policy not to make political donations, we The Group gives full consideration to applications for employment from persons recognise the rights of our employees to participate in the political process. Their with a disability where the candidate’s particular aptitudes and abilities are rights to do so are governed by the applicable laws in the countries in which we consistent with and adequately meet the requirements of the role. The Group operate. For example, in the US under the Federal Election Campaign Act, US encourages and assists employees with a disability with training, career employees can establish non-partisan political action committees known as development and promotion opportunities, and where existing employees ‘PACs’ that encourage voluntary employee participation in the political process. become disabled, our policy is to provide continuing employment and training PACs are a common feature of the US political system and operate independently wherever possible. Where changes to working practices or structure affect staff, of any political party or candidate. staff are consulted and given the appropriate support. All employees are provided with information on matters of concern to them in their work, through regular LSEG US Holdco, Inc. operates a PAC for US employees. Consistent with US law, briefing meetings and internal publications. To inform employees of the LSEG US Holdco, Inc. pays for the PAC’s administrative expenses; providing such economic and financial factors affecting our business, regular updates are support is not considered to be a political donation or expenditure under US law. posted on our intranet and engagement events are hosted, such as ‘Townhall’ In accordance with the applicable law the PAC is funded entirely by voluntary style meetings with members of our Executive Committee, providing a briefing contributions from eligible employees. All decisions on the amounts and of specific areas of the business. recipients of contributions are directed by a steering committee comprising employees eligible to contribute to the PAC.

During the year, a total of US$29,000 was donated to political organisations by the LSEG US Holdco, Inc. employee operated PAC. All LSEG US Holdco, Inc contributions will be reviewed for legal compliance and will be publicly reported in accordance with US election laws.

London Stock Exchange Group plc 130 Annual Report 31 December 2019 Governance Directors’ Report

Significant agreements Events since the balance sheet date ––The following are significant agreements to which the Company is a party that In January 2020 the Group created a Post Trade division. The division includes take effect, alter or terminate upon a change of control of the Company LCH Group and the post trade businesses in Italy, CC&G and Monte Titoli, which following a takeover bid were previously reported separately as part of our financial results. The Post Trade division also includes UnaVista, the trade reporting and reconciliation ––SwapClear business that previously reported in Information Services. LCH, along with a number of investment banks, is party to an agreement for the clearing of OTC interest rate swaps in relation to the SwapClear business. The Group will disclose segmental information for the Post Trade division in Such arrangements contain certain provisions that entitle the banks to future financial reporting. terminate the agreement on a change of control of the Company ––Facility Agreements Employee Benefit Trust The Company has entered into two syndicated, committed, revolving facility As at 31 December 2019, the trustee of the London Stock Exchange Employee agreements dated 9 November 2015 and 11 December 2017; which provide an Benefit Trust, which is an independent trustee, held 517,563 shares under the aggregate £1.2 billion of flexible financing capacity. The facilities are partially terms of the trust for the benefit of employees and former employees of the drawn and sized to provide comfortable headroom to the Group. The terms of Company and its subsidiaries. The trust is a discretionary trust and the shares are the above agreements are consistent and appropriate for an investment grade held to meet employees’ entitlements under the Company’s share plans. borrower including change of control provisions which, if triggered, allow the Employees have no voting rights in relation to the unencumbered shares while Facility Agent, upon instructions from the majority lenders, to cancel the they are held in trust. The trustee has full discretion to exercise the voting rights facility and declare all outstanding loans under the agreement, together with attaching to the unencumbered shares or to abstain from voting. Shares acquired accrued interest and all other amounts accrued, due and payable by employees through the Company’s employee share plans rank equally with the ordinary shares in issue and have no special rights. ––Bridge Facility Agreement The Company has entered into a syndicated, committed, term facility Branches outside the UK agreement dated 1 August 2019; which provides financing capacity related to Certain of the Company’s subsidiaries have established branches in a number of the Company’s proposed acquisition of Refinitiv. The facilities comprise two different countries in which they operate. tranches of US$9.325 billion and €3.58 billion. The facility remains undrawn to date. The terms of the above agreement are consistent and appropriate for an Financial Risk Management investment grade borrower including change of control provisions which, if The use of financial instruments by the Group and the Group’s Financial Risk triggered, allow the Facility Agent, upon instructions from the majority lenders, Management have been specifically considered by the Directors, and relevant to cancel the facility and declare all outstanding loans under the agreement, disclosures appear in Principal Risks and Uncertainties, on pages 60–73 of this together with accrued interest and all other amounts accrued, due and payable Annual Report, and in the Notes to the Financial Statements, on pages 158–163 ––Notes of this Annual Report, and in each case are incorporated by reference into this The Company has issued to the wholesale fixed income market under its Directors’ Report. Euro Medium Term Notes Programme (the value of which is £2.5 billion), three €500 million tranches of euro notes due in 2024, 2027 and 2029. The notes Directors’ statement as to disclosure of information to auditors contain a ‘redemption upon change of control’ provision which, if triggered by In accordance with Section 418(2) of the Companies Act 2006, the Directors the combination of a change of control and, within 120 days thereafter, a credit confirm, in the case of each Director in office at the date the Directors’ Report is rating downgrade to non-investment grade, allows note holders to exercise approved as listed on pages 75–77, that: their option to require the Company to redeem the notes and pay any accrued ––So far as the Director is aware, there is no relevant audit information of which and unpaid interest due the Company’s auditors are unaware ––Retail Bond Issue ––They have taken all the steps that they ought to have taken as a Director in The Company has issued £300 million in Sterling denominated retail bonds, order to make himself or herself aware of any relevant audit information and to under the Euro Medium Term Notes Programme referred to above, which are establish that the Company’s auditors are aware of that information due in 2021. The retail bonds contain change of control provisions which, if triggered, by the combination of a change of control and, within 120 days thereafter, a credit rating downgrade to non-investment grade, allow the holder of these bonds to have the option to require the Company to repay early or to purchase the bonds of that holder at their face value together with the accrued interest ––Employee Share Plans The rules of the Company’s employee share plans set out the consequences of a change of control of the Company on employees’ rights under the plans. Generally such rights will vest on a change of control and participants will become entitled to acquire shares in the Company (although in certain circumstances the Remuneration Committee has the discretion to defer vesting and to require rights to be exchanged for equivalent rights over the acquiring company’s shares)

London Stock Exchange Group plc Annual Report 31 December 2019 131 Directors’ Report (continued)

Financial viability statement Further information In accordance with provision 31 of the Code, the Directors confirm that they have Stress testing capabilities are detailed in the risk management oversight a reasonable expectation that the Group will continue to operate and meet its supplement that can be found on: www.lseg.com/about-london-stock- liabilities, as they fall due, for the next three years. A period of three years has exchange-group/risk-management-oversight. been chosen for the purpose of this viability statement, in line with the Group’s business plan. The Directors’ assessment has been made with reference to the Going Concern Group’s current position and prospects, the Group’s three-year business plan, the The Group’s business activities, together with the factors likely to affect its Group’s risk appetite and the expected impact of a selected group of severe but future development, performance and position and its objectives and policies plausible downside scenarios. in managing the financial risks to which it is exposed and its capital are set out in the Strategic Report on pages 2–73. The Directors’ statement in relation The business plan makes certain assumptions about the performance of the to going concern is set out in the Statement of Directors’ Responsibilities on core revenue streams and segments, using existing product lines as well as page 133. assumptions on take up of new product lines, assumptions on appropriate levels of investment to support expected performance, known inorganic activity, the Future developments ability to refinance debt as required, and expected returns to shareholders. The Executive Management team monitors future development and market trends affecting the Group and its subsidiaries on an ongoing basis. Details of The plan is stress tested using a selected group of severe but plausible downside these developments and trends and the potential implications for the Group can scenarios as determined relevant by the Group Risk Committee, over the full be found in the Market trends and our response section of the Annual Report three-year plan period. Impacts on the performance of core revenue streams and (pages 14–20). segments are modelled through business inputs, with appropriate mitigating factors also considered. Auditors A resolution to reappoint EY LLP as the Company’s auditors will be proposed The impact on the Group’s cash-flows, liquidity headroom, and debt covenants at the AGM. are detailed throughout the three-year period in each scenario. No scenario over the three-year period leads to a breach in Group covenants or an inability to meet Strategic Report the Group’s obligations through insufficient headroom. Further, a reverse stress The Strategic Report (pages 2–73) was approved by the Board on test has been completed, to evaluate the financial impacts required to breach the 27 February 2020 and signed on its behalf. Group Risk Committee’s risk appetite. By Order of the Board

Lisa Condron Group Company Secretary 28 February 2020

London Stock Exchange Group plc 132 Annual Report 31 December 2019 Governance Statement of Statement of Directors’ responsibilities Directors’ responsibilities

The Directors are responsible for preparing the Annual Report, the Legislation in the United Kingdom governing the preparation and dissemination Directors’ Remuneration Report and the financial statements in of financial statements may differ from legislation in other jurisdictions. accordance with applicable law and regulations. The Group’s business activities, together with the factors likely to affect its future Company law requires the Directors to prepare financial statements for each development, performance and position are set out in the Overview and Strategic financial year. The Directors have prepared the Group and Company financial Report sections of the Annual Report on pages 2–73. In particular, the current statements in accordance with International Financial Reporting Standards economic conditions continue to pose a number of risks and uncertainties for (IFRSs) as adopted by the European Union and applicable law. the Group and these are set out in Principal Risks and Uncertainties on pages 60–73. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of the The Financial Risk Management objectives and policies of the Group and the affairs of the Group and the Company and of the profit or loss for that year. exposure of the Group to capital risk, credit risk, market risk and liquidity risk are discussed on pages 158–163. The Group continues to meet Group and In preparing those financial statements, the Directors are required to: individual entity capital requirements and day-to-day liquidity needs through the Group’s cash resources and available credit facilities. The combined total of ––Select suitable accounting policies in accordance with IAS 8: Accounting Policies, committed facilities and bonds issued at 31 December 2019 was £2,781 million Changes in Accounting Estimates and Errors and then apply them consistently (2018: £3,103 million) excluding the undrawn Bridge Facility arranged to provide ––Present information, including accounting policies, in a manner that provides financing capacity relating to the Group’s proposed acquisition of the Refinitiv relevant, reliable, comparable and understandable information business, with the first maturing in November 2021, described further in the Financial Review on pages 53–59. ––Make judgements and estimates that are reasonable ––Provide additional disclosures when compliance with the specific requirements The Directors have reviewed the Group’s forecasts and projections, taking into in IFRSs as adopted by the EU is insufficient to enable users to understand the account reasonably possible changes in trading performance, which show that impact of particular transactions, other events and conditions on the Group the Group has sufficient financial resources. On the basis of this review, and after and the Company’s financial position and financial performance making due enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational ––State whether the Group and the Company financial statements have been existence for the foreseeable future. Accordingly, they continue to adopt the prepared in accordance with IFRSs as adopted by the EU, subject to any going concern basis in preparing the financial statements. material departures disclosed and explained in the financial statements ––Prepare the financial statements on the going concern basis, unless it is Each of the Directors, whose names and functions are set out on pages 76–78 inappropriate to presume that the Group and the Company will continue of this Annual Report confirms that, to the best of their knowledge and belief: in business ––The Group and the Company financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the The Directors confirm that they have complied with the above requirements assets, liabilities, financial position and profit or loss of the Company and the in preparing the financial statements. Group taken as a whole The Directors are responsible for keeping adequate accounting records that are ––The report of the Directors contained in the Annual Report includes a fair review sufficient to show and explain the Group and the Company’s transactions and of the development and performance of the business and the position of the disclose with reasonable accuracy at any time the financial position of the Company and the Group taken as a whole, together with a description of the Company and the Group and to enable them to ensure that the financial principal risks and uncertainties that they face statements and the Directors’ Remuneration Report comply with the Companies ––They consider that the Annual Report and Accounts 2019, taken as a whole, is Act 2006, other applicable laws and regulations, including the requirements of fair, balanced and understandable and provide the information necessary for the Listing Rules and the Disclosure Guidance and Transparency Rules, and, as shareholders to assess the Group and the Company’s performance, business regards the Group financial statements, Article 4 of the IAS Regulation. The model and strategy Directors are also responsible for safeguarding the assets of the Company and the Group and for taking reasonable steps for the prevention and detection of By Order of the Board fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information on the Company’s website.

Lisa Condron Group Company Secretary 28 February 2020

London Stock Exchange Group plc Annual Report 31 December 2019 133 Independent Auditor’s Report to the members of London Stock Exchange Group plc

Opinion Conclusions relating to principal risks, going concern In our opinion: and viability statement We have nothing to report in respect of the following information in the annual ––London Stock Exchange Group plc’s (the “Company”, the “Group”) consolidated report, in relation to which the ISAs (UK) require us to report to you whether we financial statements and parent company financial statements (the “financial have anything material to add or draw attention to: statements”) give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2019 and of the Group’s profit for ––the disclosures in the Annual Report set out on pages 60–73 that describe the the year then ended; principal risks and explain how they are being managed or mitigated; ––the Group financial statements have been properly prepared in accordance ––the directors’ confirmation set out on page 131 in the Annual Report that they with International Financial Reporting Standards (IFRS) as adopted by the have carried out a robust assessment of the principal risks facing the entity, European Union (EU); including those that would threaten its business model, future performance, solvency or liquidity; ––the parent company financial statements have been properly prepared in accordance with IFRS as adopted by the EU as applied in accordance with the ––the directors’ statement set out on page 133 in the financial statements about provisions of the Companies Act 2006; and whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material ––the financial statements have been prepared in accordance with the uncertainties to the entity’s ability to continue to do so over a period of at least requirements of the Companies Act 2006, and, as regards the Group financial twelve months from the date of approval of the financial statements statements, Article 4 of the IAS Regulation. ––whether the directors’ statement in relation to going concern required under We have audited the financial statements of London Stock Exchange Group plc the Listing Rules in accordance with Listing Rule 9.8.6R(3) is materially which comprise: inconsistent with our knowledge obtained in the audit; or Group Parent company ––the directors’ explanation set out on page 132 in the Annual Report as to how Consolidated balance sheet as at Balance sheet as at 31 December they have assessed the prospects of the entity, over what period they have 31 December 2019 2019 done so and why they consider that period to be appropriate, and their Consolidated income statement for Statement of changes in equity for statement as to whether they have a reasonable expectation that the entity will the year then ended the year then ended be able to continue in operation and meet its liabilities as they fall due over the Consolidated statement of Cash flows statements for the year period of their assessment, including any related disclosures drawing attention comprehensive income for the year then ended then ended to any necessary qualifications or assumptions. Consolidated statement of changes Related notes 1 to 36 to the financial in equity for the year then ended statements including a summary of Overview of our audit approach significant accounting policies Key audit matters ––Risk that goodwill and purchased intangible assets Consolidated cash flows statements may be impaired for the year then ended ––Risk that expenses related to internally developed Related notes 1 to 36 to the financial software are capitalised inappropriately, or that statements, including a summary of internally developed software is impaired significant accounting policies ––Risk of fraud in recognition of revenue in secondary Tables within the Directors’ capital markets trading, revenue share for clearing Remuneration Report identified as arrangements, and information services revenue ‘audited’ on pages 98 to 128. accruals within the FTSE Russell business Audit scope ––We performed an audit of the complete financial The financial reporting framework that has been applied in their preparation information of seven components and audit procedures on specific balances for a further 12 is applicable law and IFRSs as adopted by the EU and, as regards the parent components. company financial statements, as applied in accordance with the provisions ––The components where we performed full or specific of the Companies Act 2006. audit procedures accounted for 91% of unadjusted pre-tax profit, 91% of adjusted pre-tax profit, 97% of Basis for opinion revenue and 100% of total assets. We conducted our audit in accordance with International Standards on Materiality ––Overall Group materiality is £40.7 million which Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those represents 5% of adjusted pre-tax profit from continuing operations, calculated by including the standards are further described in the Auditor’s responsibilities for the audit of impact of the amortisation of purchased intangible the financial statements section of our report below. We are independent of assets, but excluding other non-underlying items as the Group and parent company in accordance with the ethical requirements disclosed in note 8 of the financial statements. that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (FRC) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

London Stock Exchange Group plc 134 Annual Report 31 December 2019 Governance Independent Auditor’s Report

Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. Key observations communicated Risk Our response to the risk to the Audit Committee Risk that goodwill and purchased intangible We have confirmed our understanding of the impairment We concluded that the WACC discount assets may be impaired assessment process and assessed the design effectiveness of rates, LTGR, customer retention rates key controls, concluding that a substantive audit approach and cash flow forecasts used by Balance of £3.9 billion, prior year comparative should be adopted. management in the impairment £4.2 billion assessment are within a reasonable The following procedures were performed in order to determine range as at 31 December 2019. Impairment charge of £15 million, prior year the acceptable range of the carrying value of goodwill and comparative £Nil. purchased intangible assets: We identified that the goodwill allocated to the Turquoise Global The Group holds significant intangible assets on its For material cash generating units (CGU), we examined the cash balance sheet, including goodwill, customer Holdings Limited and Mergent Inc. flow forecasts which support management’s impairment CGUs was impaired by £8 million and relationships, brands, software licenses, and assessment and tested compliance with the requirements of IAS intellectual property. £6 million, respectively. The value in 36 ‘Impairment of Assets’. We tested the reasonableness of those use of the Mergent CGU is equal to the We have determined the valuation of these forecasts and the evidence supporting the underlying carrying value and as such, the intangible assets to be a key audit matter due to the assumptions, by comparing to Board-approved budgets which remaining carrying value of goodwill size of the goodwill and purchased intangible assets were challenged by considering prior periods’ budget accuracy, is sensitive to changes in revenue as at 31 December 2019 and the involvement of comparing the expected growth rates to relevant market from customers. significant judgement by management in expectations, and considering recent market developments determining the valuation of the intangible assets. including changes in tax rates. We did not identify any additional factors that would lead to a revision On an annual basis, management are required to In respect of purchased intangible assets, we tested and of the amortisation periods applied perform an impairment assessment for goodwill, challenged management’s assessment as to whether indicators of for purchased intangible assets. and to assess for indicators of impairment in impairment exist as at the balance sheet date, by reference to respect of purchased intangible assets. Where factors specific to each class of assets and our understanding of We are satisfied that the carrying indicators of impairment of purchased intangible the business. Examples included back-testing customer retention values of goodwill and purchased assets are identified, a full impairment assessment rates within specific business lines and the current returns made intangible assets are reasonable and is performed. These assessments involve significant on intellectual property. the related disclosures are compliant with IFRS as adopted by the EU. management judgement in the application of We tested the WACC discount rates assigned to each of the CGUs, valuation models and assumptions. as well as the LTGR, with reference to our understanding of the We have completed our procedures The following significant judgements and estimates business, comparisons to other similar companies and broader and have no material findings to used in the valuation models could be selected market considerations. report with the exception of Mergent as outlined above. inappropriately: The WACC discount rates and LTGR applied within each ––Weighted-average cost of capital (WACC) impairment model were critically assessed by EY valuation ––Long-term growth rates (LTGR) specialists, including comparison to economic and industry ––Cash flow forecasts forecasts where appropriate. We considered evidence available to ––Amortisation periods for purchased intangible assets support the WACC discount rates and LTGR used, and assessed ––Customer retention rates consistency with findings from other areas of the audit. Using EY valuation specialists, we assessed specific inputs in the As a consequence, there is a greater risk of determination of the WACC discount rates, including the risk-free misstatement in these balances, either by fraud or rate, equity beta and market/size premium, along with gearing error, including through the potential override of and cost of debt. We benchmarked the inputs against observed controls by management. risk rates in the markets where the Group operates. Refer to the Report of the Audit Committee We also obtained the sensitivity analysis prepared by management (page 90); Accounting policies (page 151); and on the cash flow forecasts and other key inputs to the impairment Notes 4 and 14 of the Financial Statements model (including WACC discount rates, LTGR and customer retention (pages 164 and 173–175) rates), and further sensitised the analysis to understand the impact that reasonably possible changes to key assumptions would have on The risk has neither increased nor decreased in the overall carrying value of the goodwill and purchased intangible the current year. assets at the balance sheet date. We also assessed the appropriateness of the remaining amortisation period by comparing management’s forecasts against historic data. In addition to the above procedures, we performed journal entry testing in order to identify and test the risk of misstatement arising from management override of controls. We performed full scope audit procedures over this risk area in nine components, which covered 100% of the risk amount.

London Stock Exchange Group plc Annual Report 31 December 2019 135 Independent Auditor’s Report to the members of London Stock Exchange Group plc (continued)

Key observations communicated Risk Our response to the risk to the Audit Committee Risk that expenses related to internally developed We confirmed our understanding of the capitalisation and We concluded that the assessment software are capitalised inappropriately, or that impairment assessment processes and assessed the design and performed by management met the internally developed software is impaired operating effectiveness of key controls. We concluded that the capitalisation criteria set out in IFRS controls were designed, implemented and operating effectively, as adopted by the EU. Balance of £0.5 billion, prior year comparative £0.5 and therefore took a controls-reliance approach. billion Where indicators of impairment had been identified and a full impairment The capitalisation of expenses to internally For a sample of additions, we have agreed amounts capitalised to underlying documentation, including, as appropriate, timesheets, assessment had been prepared, we developed software involves management’s concluded that the WACC discount judgement, when making their assessment of invoices and other evidence to confirm that the costs were incurred, and meet the capitalisation criteria of IAS 38 ‘Intangible Assets’. rates, LTGR, and cash flow forecasts capitalisation against criteria set out in IFRS as used by management in the adopted by the EU. For a sample of assets not yet brought into use we have tested impairment assessment are within a The Group is required to review capitalised software and challenged management’s assessment for indicators of reasonable range as at 31 December assets for impairment whenever events or changes impairment, and where a full impairment assessment had been 2019. in circumstances indicate that their carrying carried out, we tested the key assumptions used within the We did not identify any material amounts may not be recoverable, and at least assessment, such as the WACC discount rates, LTGR and cash flow indicators of impairment for internally annually, review whether there is any change in forecasts. We have also gained an understanding of the status of developed software which had not their expected useful lives. related projects through enquiries of management and already been impaired by assessment of recent additions and reviewed project progress Where indicators of impairment are identified management. reports for potential indicators of impairment. a full impairment assessment is performed We did not identify any additional at the reporting date. Such assessments involve We also reviewed sensitivity analysis performed by management factors that would lead to a revision of management judgement in the application of and performed higher degree sensitivity analysis on the cash flow the remaining useful lives applied for valuation models and assumptions. forecasts and other key inputs to the impairment model internally developed software. (including WACC discount rates and LTGR), to understand the In addition, as internally generated assets move Based on the procedures performed, impact that reasonably possible changes to key assumptions closer to the end of their useful life, the risk of we are satisfied that the carrying would have on the overall carrying value of the internally impairment may increase. value of internally developed software developed software at the balance sheet date. The following significant judgements and estimates have been adequately accounted for and disclosed in the financial used in the valuation models could be selected We have tested the appropriateness of the amortisation period statements. inappropriately: based on economic lives and management’s best estimates of ––Weighted-average cost of capital (WACC) future performance, amortisation method and residual values. ––Long-term growth rates (LTGR) ––Cash flow forecasts We have, in addition, performed journal entry testing in order to ––Amortisation periods for internally developed identify and test the risk of misstatement arising from software management override of controls. As a consequence, there is a greater risk of We performed full and specific scope audit procedures over this misstatement in this balance, either by fraud or risk area in nine components, which covered 91.8% of the risk error, including through the potential override of amount. controls by management. Refer to the Report of the Audit Committee (page 90); Accounting policies (page 151); and Note 14 of the Financial Statements (pages 173–175) The risk has neither increased nor decreased in the current year.

London Stock Exchange Group plc 136 Annual Report 31 December 2019 Governance Independent Auditor’s Report

Key observations communicated Risk Our response to the risk to the Audit Committee Risk of fraud in recognition of revenue in secondary We confirmed our understanding of the secondary capital Based on the procedures performed, capital markets trading, revenue share for clearing markets trading, revenue share clearing arrangements and FTSE we concluded that revenue related to arrangements, and information services revenue Russell revenue accruals processes, and evaluated the design secondary capital markets trading, accruals within the FTSE Russell business effectiveness of key controls. revenue share for clearing arrangements, and information Secondary capital markets – Balance of £0.2 billion, We evaluated whether the revenue recognition policy is appropriate services revenue accruals within the prior year comparative £0.2 billion and in accordance with IFRS as adopted by the EU. FTSE Russell business has been We also performed cut-off testing to gain assurance that revenue recognised appropriately in accordance Revenue share for clearing arrangements – Balance was recognised in the correct period. with IFRS as adopted by the EU. of £(0.1) billion, prior year comparative £(0.1) billion Secondary capital markets trading Information services revenue accruals – Balance of For the secondary capital markets trading process, we performed £0.1 billion, prior year comparative £0.1 billion testing of the operating effectiveness of key controls in one full Compensation tied to the performance of the entity scope component. For this component, we concluded that the may create an incentive for management to controls were designed, implemented and operating effectively, manipulate results. and therefore took a controls-based approach. We adopted a substantive audit approach in the other in-scope components. We have determined this to be a key audit matter having identified three revenue streams with We increased our standard sample size for transactional testing to heightened risk of misstatement: respond to the risk of fraud. We agreed a random selection of transactions back to supporting audit evidence, such as invoices ––Secondary capital markets revenue (for certain and cash receipts. We also recalculated the fee charged and business lines) involves multiple pricing structures checked back to the pricing policy and relevant tariff schedule. based on product types, customer activity and volumes. This complexity leads to a heightened We reconciled trading platform data to the general ledger and risk that revenue may not be recognised tested material manual journals. appropriately, either as a result of fraud, or error. We also used analytical tools to identify outliers in large volumes ––Contracts relating to revenue sharing in respect of transactional data for focused follow-up testing. This analysis of clearing arrangements, between the Group’s included comparing the fee per transaction to volume (notional) central counterparty (CCPs) and third party traded and investigating any particularly high values which were participants, in some cases, involve complex highlighted as outliers to the overall population. calculations to determine the appropriate level of revenue to recognise within the Group. Revenue share for clearing arrangements ––Information services revenue accruals (presented We confirmed our understanding of the revenue share clearing within contract assets) can require estimation, for arrangement process and accordingly adopted a substantive audit instance based on prior billings or preliminary usage. approach for the material revenue share arrangements. As a consequence, there is a greater risk of We tested revenue sharing calculations for the material business misstatement in these balances, either by fraud or lines by agreeing key terms with the underlying contracts. error, including through the potential override of We also used analytical procedures in the analysis of the related controls by management. revenue streams. This included analysing monthly trading Refer to the Report of the Audit Committee volumes and their correlation with monthly revenue recognised; (page 90); Accounting policies (page 151); and Note any anomalies identified were investigated. 5 of the Financial Statements (pages 164–167) Information services revenue accruals within the FTSE The risk on information services revenue accruals Russell business has been focussed on the accruals within the FTSE We adopted a substantive audit approach in relation to the Russell business given the increased element of information services revenue accruals process. estimation compared to other revenue accruals We selected a sample of revenue accruals using a lower testing within the information services division which are threshold when compared to our standard testing approach. For based on known amounts. the selected samples, we obtained supporting evidence, including The risk on secondary capital markets trading and subsequent billing or payment evidence and customer consent, revenue share for clearing arrangements has neither for accrued amounts. increased nor decreased in the current year. For revenue based on assets under management (“AUM”), we tested the calculations on a statistical sample basis and checked back to the supporting agreements. We also validated the AUM used in the calculations to an independent third party source or customer declaration. For Q4 accruals based on Q3 information, we tested the appropriateness of using Q3 information for purposes of the year end accruals. We also performed corroborative testing to invoices raised post year end and cash collected where applicable. For all revenue streams and revenue accruals listed above, we performed analytical procedures and journal entry testing in order to identify and test the risk of misstatement arising from management override of controls. We performed full and specific scope audit procedures over this risk area in seven components, which covered 99.2% of the risk amount.

In the prior year, our auditor’s report included a key audit matter in relation to “Application of IFRS 15 to primary capital markets admission fees”. As the application of IFRS 15 to primary capital markets admission fees had been fully implemented prior to the start of the current period, the audit team did not assess this to be a key audit matter for the 2019 audit.

London Stock Exchange Group plc Annual Report 31 December 2019 137 Independent Auditor’s Report to the members of London Stock Exchange Group plc (continued)

An overview of the scope of our audit The remaining 77 components together represent less than 9% of the Group’s Tailoring the scope pre-tax profit, adjusted pre-tax profit, revenue and total assets. For these Our assessment of audit risk, our evaluation of materiality and our allocation of components we performed other procedures, including analytical review and performance materiality determine our audit scope for each entity within the testing of consolidation journals and intercompany eliminations, to respond to Group. Taken together, this enables us to form an opinion on the Group financial potential risks of material misstatement to the Group financial statements statements. We take into account size, risk profile, the organisation of the Group and effectiveness of Group-wide controls, changes in the business environment The charts below illustrate the coverage obtained from the work performed by and other factors such as recent Internal Audit findings when assessing the level our audit teams. of work to be performed at each entity. Proﬁt before Tax* In assessing the risk of material misstatement to the Group financial statements, 1 and to ensure we had adequate quantitative coverage of significant accounts in 3 the financial statements, of the 96 reporting components of the Group, we selected 19 components covering entities headquartered within the United Kingdom, United States of America, Italy, France and Sri Lanka, which represent 1 71% the principal business units within the Group. 2 20% 3 9% Of the 19 components selected, we performed an audit of the complete financial 2 information of seven components (“full scope components”) which were selected based on their size or risk characteristics. For the remaining 12 components (“specific scope components”), we performed audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on the significant accounts in the Group financial statements Adjusted Proﬁt before Tax* either because of the size of these accounts or their risk profile. 1 3 Scope Procedures performed by Number of components Full Primary team 4 Full Component teams 3 Specific Primary team 10 Specific Component team 2 1 70% Total 19 2 2 21% 3 9% Details of the five components which were audited by component teams are set out below:

Component Headquartered location Scope Auditor London Stock Exchange Revenue Group Holdings Italy S.p.A. Italy Full EY 1 2 3 LSEG US Holdco Inc.1 United States of America Full EY LCH S.A. France Full EY and BDO LSEGH Inc United States of America Specific EY 1 95% Millennium Information Technologies (Private) 2 3% Limited Sri Lanka Specific EY 3 2% 1. Some specific accounts within LSEG US Holdco Inc. were audited by the EY primary audit team The reporting components where we performed audit procedures accounted for 91% (2018: 95%) of the Group’s pre-tax profit, 91% (2018: 95%) of the Group’s adjusted pre-tax profit measure used to calculate materiality (see page 139 below), 97% (2018: 97%) of the Group’s Revenue and 100% (2018: 100%) of the Total assets Group’s Total assets.

For the current year, the full scope components contributed 71% (2018: 75%) of the Group’s pre-tax profit, 70% (2018: 77%) of the Group’s adjusted pre-tax profit, 95% (2018: 95%) of the Group’s Revenue and 100% (2018: 100%) of the Group’s 1 100% Total assets.

The specific scope component contributed 20% (2018: 20%) of the Group’s pre-tax profit, 21% (2018: 18%) of the Group’s adjusted pre-tax profit, 2% (2018: 2%) of the Group’s Revenue and less than 1% (2018: less than 1%) of the Group’s Total assets. The audit scope of these components may not have included testing of all significant accounts of the component but will have contributed to the coverage of significant accounts tested for the Group. 1 Full 2 Speciﬁc 3 Out of Scope

* The percentages were calculated based on absolute values London Stock Exchange Group plc 138 Annual Report 31 December 2019 Governance Independent Auditor’s Report

Changes from the prior year Materiality All full scope components remained consistent. In the prior year, we identified 14 The magnitude of an omission or misstatement that, individually or in the aggregate, specific scope components. Specific scope components have been re-assessed could reasonably be expected to influence the economic decisions of the users as the contribution of these smaller parts of the business to the Group financial of the financial statements. Materiality provides a basis for determining the statements varies each year. nature and extent of our audit procedures.

Involvement with component teams We determined overall materiality for the Group to be £40.7 million In establishing our overall approach to the Group audit, we determined the type (2018: £35.5 million), which is 5% (2018: 5%) of adjusted pre-tax profit from of work that needed to be undertaken at each of the components by us, as the continuing operations, calculated by including the impact of amortisation primary audit engagement team, or by component auditors from other EY global of purchased intangible assets, but excluding other non-underlying items network firms or other firms operating under our instruction. as disclosed in note 8 of the financial statements.

Of the seven full scope components, audit procedures were performed on four We consider the basis of our materiality to be one of the important considerations of these directly by the primary audit team. For the three full scope and one for shareholders of the Company in assessing the financial performance of the specific scope components, where the work was performed by component Group. It is linked to the key earnings measures discussed when the Group auditors, we determined the appropriate level of involvement to enable us to presents the financial results. In addition to non-underlying items, the Group also determine that sufficient audit evidence had been obtained as a basis for our excludes amortisation of purchased intangibles to present adjusted operating opinion on the Group as a whole. profit; this amount is not excluded from our materiality calculation.

The Group audit team continued to follow a programme of planned visits that We determined materiality for the parent company to be £46.5 million (2018: has been designed to ensure that the Senior Statutory Auditor visits the principal £7.1 million), which is 1% of equity. We believe that equity is an appropriate basis locations of the Group. to determine materiality given the nature of the parent company as the investment holding company of the Group. Any balances in the parent company During the current year’s audit cycle, visits were undertaken by the Senior financial statements that were relevant to our Group audit were audited using an Statutory Auditor and/or other senior members of the primary audit team to the allocated performance materiality. The allocated materiality is based on the following locations: relative scale and risk of the parent company to the Group as a whole, and our

Number assessment of the risk of misstatement. The reason for the increase in the parent Component Location Scope of visits company materiality is due to a change in basis. In 2018, we determined London Stock Exchange materiality for the parent company based on the allocated performance Group Holdings Italy S.p.A Milan, Italy Full 2 materiality for purposes of the Group audit. LSEG US Holdco Inc. New York, Full LSEGH Inc United States of America Specific 2 Our overall materiality threshold provided a basis for determining the nature, LCH S.A Paris, France Full 2 timing and extent of risk assessment procedures, identifying and assessing the Millennium Information risk of material misstatement and determining the nature, timing and extent of Technologies Limited Colombo, Sri Lanka Specific 1 further audit procedures. Our evaluation of materiality requires professional judgement and necessarily takes into account qualitative as well as quantitative These visits involved discussing the audit approach with the component team considerations implicit in the definition. and any issues arising from their work, as well as meeting with local management. In addition, we participated in planning and closing meetings and Starting basis ––£650.7 million reviewed selected key audit working papers. The primary team interacted ––Profit before tax from continuing operations regularly with the component teams where appropriate during various stages of the audit, reviewed key working papers and were responsible for the scope and direction of the audit process. This, together with the additional procedures performed at Group level, gave us appropriate evidence for our opinion on the Adjustments ––£163.6 million Group financial statements. ––Exclude non-underlying items, mostly costs related to the proposed acquistion of Refinitiv and other potential Our application of materiality M&A transactions, and costs related to the cost We apply the concept of materiality in planning and performing the audit, in savings programme evaluating the effect of identified misstatements on the audit and in forming our audit opinion.

Adjusted ––£814.3 million basis ––Adjusted pre-tax profit from continuing operations but including amortisation of purchased intangible assets

Materiality ––Materiality of £40.7 million (5% of materiality basis)

During the course of our audit, we reassessed initial materiality and made adjustments based on the final financial performance of the Group.

London Stock Exchange Group plc Annual Report 31 December 2019 139 Independent Auditor’s Report to the members of London Stock Exchange Group plc (continued)

Performance materiality Other information The application of materiality at the individual account or balance level. It is set The other information comprises the information included in the annual report set at an amount to reduce to an appropriately low level the probability that the out on pages 2 to 133 including the Strategic Report (including Highlights, Chair’s aggregate of uncorrected and undetected misstatements exceeds materiality. Statement, CEO’s statement, What we do – our business model, Overview of Group activities, Market trends and our response, Strategy in action, Executive management On the basis of our risk assessments, together with our assessment of the team, Segmental review, Supporting sustainable growth, Board engagement with Group’s overall control environment, our judgement was that performance stakeholders, How the Board has complied with Section 172(1)of the Companies Act materiality was 50% (2018: 50%) of our planning materiality, namely £20.4 2006, Financial review, and Principal risks and uncertainties), Governance information million (2018: £17.8 million). We have set performance materiality at this and disclosures (including Board of Directors, Corporate governance, Complying percentage (which is the lowest in the range) due to misstatements which were with the provisions of the Code, Report of the Nomination Committee, Report of the identified in the prior year audit. Our approach is designed to have a reasonable Audit Committee, Report of Risk Committee, Directors’ Remuneration Report, Directors’ probability of ensuring that the total of uncorrected and undetected Report and Statement of Directors’ responsibilities), other than the financial misstatements does not exceed our overall materiality of £40.7 million (2018: statements and our auditor’s report thereon. The directors are responsible £35.5 million) for the Group financial statements as a whole. for the other information.

Audit work at component locations for the purpose of obtaining audit coverage Our opinion on the financial statements does not cover the other information over significant financial statement accounts is undertaken based on a and, except to the extent otherwise explicitly stated in this report, we do not percentage of total performance materiality. The performance materiality set for express any form of assurance conclusion thereon. each component is based on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that In connection with our audit of the financial statements, our responsibility is to component. read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our In the current year, the performance materiality allocated to components was knowledge obtained in the audit or otherwise appears to be materially misstated. as follows: If we identify such material inconsistencies or apparent material misstatements,

Allocated performance we are required to determine whether there is a material misstatement in the materiality financial statements or a material misstatement of the other information. If, Component £m based on the work we have performed, we conclude that there is a material London Stock Exchange Group plc 7.6 misstatement of the other information, we are required to report that fact. London Stock Exchange plc 13.2 LCH Limited 11.2 We have nothing to report in this regard. LCH S.A. 7.6 London Stock Exchange Group Holdings Italy S.p.A. 10.2 In this context, we also have nothing to report in regard to our responsibility to LSEG US Holdco, Inc. 13.2 specifically address the following items in the other information and to report as FTSE International Limited 10.2 uncorrected material misstatements of the other information where we conclude All specific scope components 4.1 that those items meet the following conditions: ––Fair, balanced and understandable set out on page 133 – the statement Reporting threshold given by the directors that they consider the Annual Report and financial An amount below which identified misstatements are considered as being statements taken as a whole is fair, balanced and understandable and provides clearly trivial. the information necessary for shareholders to assess the Group’s performance, business model and strategy, is materially inconsistent with our knowledge We agreed with the Audit Committee that we would report to them all uncorrected obtained in the audit; or audit differences in excess of £2.3 million (2018: £1.8 million), which is set at 5% ––Audit Committee reporting set out on pages 90–95 – the section describing of planning materiality, as well as differences below that threshold that, in our the work of the audit committee does not appropriately address matters view, warranted reporting on qualitative grounds. communicated by us to the Audit Committee or is materially inconsistent with our knowledge obtained in the audit; or We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative ––Directors’ statement of compliance with the UK Corporate Governance considerations in forming our opinion. Code set out on pages 78, 85–87, 129 – the parts of the directors’ statement required under the Listing Rules relating to the Company’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.

London Stock Exchange Group plc 140 Annual Report 31 December 2019 Governance Independent Auditor’s Report

Opinions on other matters prescribed by the Companies Act 2006 Auditor’s responsibilities for the audit of the financial statements In our opinion, the part of the Directors’ Remuneration Report to be audited has Our objectives are to obtain reasonable assurance about whether the financial been properly prepared in accordance with the Companies Act 2006. statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. In our opinion, based on the work undertaken in the course of the audit: Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material ––the information given in the Strategic Report and the Directors’ Report for the misstatement when it exists. Misstatements can arise from fraud or error and are financial year for which the financial statements are prepared is consistent with considered material if, individually or in the aggregate, they could reasonably be the financial statements; and expected to influence the economic decisions of users taken on the basis of ––the Strategic Report and the Directors’ Report have been prepared in accordance these financial statements. with applicable legal requirements. Explanation as to what extent the audit was considered capable of Matters on which we are required to report by exception detecting irregularities, including fraud In the light of the knowledge and understanding of the Group and the parent The objectives of our audit, in respect to fraud, are; to identify and assess the company and its environment obtained in the course of the audit, we have not risks of material misstatement of the financial statements due to fraud; to obtain identified material misstatements in the Strategic report or the Directors’ report. sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate We have nothing to report in respect of the following matters in relation to which responses; and to respond appropriately to fraud or suspected fraud identified the Companies Act 2006 requires us to report to you if, in our opinion: during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity ––adequate accounting records have not been kept by the parent company, or and management. returns adequate for our audit have not been received from branches not visited by us; or Our approach was as follows: ––the parent company financial statements and the part of the Directors’ ––We obtained an understanding of the legal and regulatory frameworks that are Remuneration Report to be audited are not in agreement with the accounting applicable to the Group and determined that the most significant are the UK records and returns; or Companies Act 2006, UK Corporate Governance Code 2016, The Financial ––certain disclosures of directors’ remuneration specified by law are not made; or Conduct Authority’s (“FCA”) Listing Rules, other relevant FCA rules and regulations, and tax legislation (governed by HM Revenue and Customs). ––we have not received all the information and explanations we require for our audit. ––We understood how the Group is complying with those frameworks by making enquiries of senior management, including the Group General Counsel, the Responsibilities of directors Chief Risk Officer, the Group Head of Compliance and the Group Head of As explained more fully in the Statement of Directors’ Responsibilities set out on Internal Audit. We also reviewed significant correspondence between the Group page 133, the directors are responsible for the preparation of the financial and regulatory bodies, reviewed minutes of the Board, Risk Committee, and statements and for being satisfied that they give a true and fair view, and for gained an understanding of the Group’s approach to governance, such internal control as the directors determine is necessary to enable the demonstrated by the Board’s approval of the Group’s governance framework preparation of financial statements that are free from material misstatement, and the Board’s review of the Group’s risk management framework and internal whether due to fraud or error. control processes. ––We assessed the susceptibility of the Group’s financial statements to material In preparing the financial statements, the directors are responsible for assessing misstatement, including how fraud might occur by considering the controls the Group and parent company’s ability to continue as a going concern, that the Group has established to address risks identified by the Group, or that disclosing, as applicable, matters related to going concern and using the going otherwise seek to prevent, deter or detect fraud. We also considered concern basis of accounting unless the directors either intend to liquidate the performance and incentive plan targets and their potential to influence Group or the parent company, or to cease operations, or have no realistic management to manage earnings or influence the perceptions of investors. alternative but to do so. ––Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved inquiries of senior management, legal counsel, the compliance officer and internal audit, review of significant correspondence with regulatory bodies and minutes of meetings of the Board and certain Board committees, and focused testing, as referred to in the key audit matters section above.

London Stock Exchange Group plc Annual Report 31 December 2019 141 Independent Auditor’s Report to the members of London Stock Exchange Group plc (continued)

––The Group operates in the exchange and CCP industries which are regulated Other matters we are required to address environments. As such, the Senior Statutory Auditor reviewed the experience ––We were appointed by the Company on 12 June 2014 to audit the financial and expertise of the engagement team to ensure that the team had the statements for the nine months period ended 31 December 2014 and appropriate competence and capabilities, which included the use of experts subsequent financial periods. The period of total uninterrupted engagement where appropriate. including previous renewals and reappointments is six years, covering the nine months period ended 31 December 2014 to the year ended 31 December 2019. ––The FCA has regulatory oversight over London Stock Exchange plc and certain other entities within the Group. The Bank of England (“BOE”) supervises CCPs in ––The non-audit services prohibited by the FRC’s Ethical Standard were not the UK and therefore regulates LCH Limited. In addition, local regulatory bodies provided to the Group or the parent company and we remain independent of in France and Italy regulate other subsidiaries of the Group, including: LCH SA the Group and the parent company in conducting the audit. which is regulated by L’Autorité de Contrôle Prudentiel et de Résolution ––The audit opinion is consistent with the additional report to the Audit (“ACPR”), Banque de France (“BDF”) and the Autorité des Marchés Financiers Committee. (“AMF”); and Borsa Italiana S.p.A., Cassa Di Compensazione e Garanzia S.p.A. (“CC&G”), EuroTLX SIM S.p.A., MTS Società per il Mercato dei Titoli di Stato S.p.A. Use of our report (“MTS”) Monte Titoli S.p.A. and Elite SIM S.p.A. which are all regulated by This report is made solely to the Company’s members, as a body, in accordance Commissione Nazionale per le Società e la Borsa and Banca d’Italia. with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we A further description of our responsibilities for the audit of the financial are required to state to them in an auditor’s report and for no other purpose. To statements is located on the FRC’s website at www.frc.org.uk/ the fullest extent permitted by law, we do not accept or assume responsibility to auditorsresponsibilities. This description forms part of our auditor’s report. anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Maurice McCormick (Senior Statutory Auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor London 28 February 2020

Notes 1. The maintenance and integrity of the London Stock Exchange Group plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site 2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions

London Stock Exchange Group plc 142 Annual Report 31 December 2019 Group financial statements Consolidated income statement Consolidated income statement

Year ended 31 December 2019 2019 2018 Underlying Non-underlying Total Underlying Non-underlying Total Notes £m £m £m £m £m £m Continuing operations Revenue 5 2,056 – 2,056 1,911 – 1,911 Net treasury income from CCP clearing business 5 255 – 255 218 – 218 Other income 5 3 – 3 6 – 6 Total income 2,314 – 2,314 2,135 – 2,135 Cost of sales 5 (210) – (210) (227) – (227) Gross profit 2,104 – 2,104 1,908 – 1,908 Expenses Operating expenses before depreciation, amortisation and impairment 6, 8 (839) (132) (971) (834) (21) (855) Income from equity investments 5, 19 7 – 7 – – – Share of loss after tax of associates 5, 15 (7) – (7) (8) – (8) Earnings before interest, tax, depreciation, amortisation and impairment 1,265 (132) 1,133 1,066 (21) 1,045 Depreciation, amortisation and impairment 8, 13, 14 (200) (195) (395) (135) (159) (294) Operating profit/(loss) 1,065 (327) 738 931 (180) 751

Finance income 14 – 14 13 – 13 Finance expense (85) (16) (101) (79) – (79) Net finance expense 8, 9 (71) (16) (87) (66) – (66) Profit/(loss) before tax 994 (343) 651 865 (180) 685

Taxation 8, 10 (236) 50 (186) (187) 55 (132) Profit/(loss) for the year 758 (293) 465 678 (125) 553 Profit/(loss) attributable to: Equity holders 699 (282) 417 603 (123) 480 Non-controlling interests 59 (11) 48 75 (2) 73 Profit/(loss) for the year 758 (293) 465 678 (125) 553

Earnings per share attributable to equity holders Basic earnings per share 11 119.5p 138.3p Diluted earnings per share 11 118.1p 136.0p Adjusted basic earnings per share 11 200.3p 173.8p Adjusted diluted earnings per share 11 198.0p 170.8p

Dividend per share in respect of the financial year Dividend per share paid during the year 12 20.1p 17.2p Dividend per share declared for the year 12 49.9p 43.2p

The notes on pages 150 to 203 form an integral part of these consolidated financial statements.

London Stock Exchange Group plc Annual Report 31 December 2019 143 Consolidated statement of comprehensive income Year ended 31 December 2019 2019 2018 Notes £m £m Profit for the financial year 465 553 Other comprehensive income: Items that will not be subsequently reclassified to profit or loss Defined benefit pension scheme remeasurement gain/(loss) 18 7 (12) Income tax relating to these items 10 – 5 7 (7) Items that may be subsequently reclassified to profit or loss: Net gains/(losses) on net investment hedges 19 71 (55) Debt instruments at fair value through other comprehensive income: ––Net gains/(losses) from changes in fair value 16 (21) ––Net (gains)/losses reclassified to the consolidated income statement on disposal (2) 4 Exchange (losses)/gains on translation of foreign operations (218) 168 Income tax relating to these items 10 (5) 4 (138) 100 Other comprehensive income net of tax (131) 93 Total comprehensive income for the year 334 646

Total comprehensive income attributable to: Equity holders 298 572 Non-controlling interests 36 74 Total comprehensive income for the year 334 646

The notes on pages 150 to 203 form an integral part of these consolidated financial statements.

London Stock Exchange Group plc 144 Annual Report 31 December 2019 Group financial statements Balance sheets Balance sheets

At 31 December 2019 Group Company 2019 2018 2019 2018 Notes £m £m £m £m Assets Non-current assets Property, plant and equipment 13 288 149 – – Intangible assets 14 4,421 4,687 – – Investment in associates 15 28 25 12 7 Investment in subsidiary companies 16 – – 6,750 6,506 Deferred tax assets 17 49 42 – – Investments in financial assets 19 266 31 – – Retirement benefit asset 18 66 46 – – Trade and other receivables 19, 21 19 33 41 25 5,137 5,013 6,803 6,538 Current assets Trade and other receivables 19, 21 566 785 668 600 Derivative financial instruments 19 2 – 2 – Clearing member financial assets 729,094 764,411 – – Clearing member cash and cash equivalents 67,118 70,927 – – Clearing member assets 19 796,212 835,338 – – Current tax 160 147 – – Investments in financial assets 19 81 53 – – Cash and cash equivalents 22 1,493 1,510 2 6 798,514 837,833 672 606

Total assets 803,651 842,846 7,475 7,144 Liabilities Current liabilities Trade and other payables 19, 23 620 538 712 402 Contract liabilities 25 157 153 – – Derivative financial instruments 19 1 30 1 30 Clearing member liabilities 19 796,102 835,508 – – Current tax 127 61 – – Borrowings 19, 26 512 561 504 544 Provisions 28 19 2 – – 797,538 836,853 1,217 976 Non-current liabilities Borrowings 19, 26 1,573 1,642 1,573 1,642 Derivative financial instruments 19 39 17 39 17 Contract liabilities 25 88 118 – – Deferred tax liabilities 17 432 475 – – Retirement benefit obligations 18 17 22 – – Other non-current payables 19, 23 150 11 – – Provisions 28 13 10 – – 2,312 2,295 1,612 1,659 Total liabilities 799,850 839,148 2,829 2,635 Net assets 3,801 3,698 4,646 4,509

London Stock Exchange Group plc Annual Report 31 December 2019 145 Balance sheets (continued)

At 31 December 2019 Group Company 2019 2018 2019 2018 Notes £m £m £m £m Equity Capital and reserves attributable to the Company's equity holders Ordinary share capital 29 24 24 24 24 Share premium 29 967 965 967 965 Retained earnings 668 424 1,836 1,701 Other reserves 1,796 1,930 1,819 1,819 Total shareholders' funds 3,455 3,343 4,646 4,509 Non-controlling interests 346 355 – – Total equity 3,801 3,698 4,646 4,509

The Company recorded profit for the year of £301 million (2018: £141 million).

The notes on pages 150 to 203 form an integral part of these consolidated financial statements.

The financial statements on pages 143 to 203 were approved by the Board on 27 February 2020 and signed on its behalf by:

David Warren David Schwimmer Chief Financial Officer Chief Executive Officer

28 February 2020 London Stock Exchange Group plc Registered number 5369106

London Stock Exchange Group plc 146 Annual Report 31 December 2019 Group financial statements Cash flow statements Cash flow statements

Year ended 31 December 2019 Group Company 2019 2018 2019 2018 Notes £m £m £m £m Cash flow from operating activities Cash generated from/(used in) operations 30 1,089 969 (196) 39 Interest received 6 3 1 1 Interest paid (103) (76) (91) (67) Royalties paid (2) (2) – – Corporation tax paid (153) (173) – – Withholding tax received – 1 – – Net cash inflow/(outflow) from operating activities 837 722 (286) (27)

Cash flow from investing activities Purchase of property, plant and equipment 13 (41) (50) – – Purchase of intangible assets 14 (154) (144) – – Proceeds from sale of businesses1 30 58 – – Cash disposed as part of the sale of businesses – (2) – – Acquisition of business, net of cash acquired2 32 (14) 3 – – Investment in subsidiaries 16 – – (244) (408) Investment in associates 15 (11) (28) (11) (12) Investments in financial assets classed as FVOCI 19 (247) – – – Investment in government bonds (3) – – – Dividends received – – 464 – Net cash (outflow)/inflow from investing activities (440) (163) 209 (420)

Cash flow from financing activities Dividends paid to shareholders 12 (221) (189) (221) (189) Dividends paid to non-controlling interests (40) (42) – – Purchase of non-controlling interests3 (9) (452) – – Loans to subsidiary companies – – (10) – Repayments received on loans to subsidiary companies – – 110 335 Loans from subsidiary companies – – 447 74 Repayment of loans to subsidiary companies – – (247) – Purchase of own shares by the employee benefit trust (5) (4) – – Proceeds from exercise of employee share options 5 7 5 6 Issue of convertible debt to external party (4) – – – Loan to associate (1) – – – Arrangement fee paid – (4) – (4) Proceeds from the issue of bonds – 445 – 445 Bond repayment (250) – (250) – Proceeds from the issue of commercial paper – 255 – 255 Repayments made towards bank credit facilities (35) (489) (26) (474) Additional drawdowns from bank credit facilities 261 – 261 – Principal element of lease payments (2018: Payments towards lease obligations) (41) (2) – – Net cash (outflow)/inflow from financing activities (340) (475) 69 448

Increase/(decrease) in cash and cash equivalents 57 84 (8) 1 Cash and cash equivalents at beginning of year 1,510 1,382 6 4 Exchange (loss)/gain on cash and cash equivalents (74) 44 4 1 Cash and cash equivalents at end of year 1,493 1,510 2 6

The notes on pages 150 to 203 form an integral part of these consolidated financial statements.

The Group’s net cash inflow from operating activities of £837 million includes £98 million of expenses related to non-underlying items.

The Company’s net cash outflow from operating activities of £286 million includes £88 million of expenses related to non-underlying items.

1 Proceeds from sale of businesses include deferred consideration of £29 million received by the Group from its disposal of the Russell Investment Management in 2016 and a further £1 million received in the current year for the disposal of Exactpro Systems Limited and its subsidiaries in the prior year. Proceeds from sale of businesses in the prior year relates to £58 million deferred consideration received by the Group from its disposal of Russell Investment Management. 2 Acquisition of business, net of cash acquired, in the current year relates to the Group’s acquisition of 100% of Beyond Ratings for £14 million. In the prior year, the Group received £3 million from the vendors of the Yield Book business on finalisation of the purchase price. 3 Purchase of non-controlling interests relates to the Group’s purchase of the remaining 30% interest in EuroTLX SIM S.p.A. from non-controlling equity holders for £9 million (€10.2 million). During the prior year, the Group completed the purchase of shareholdings from non-controlling equity holders in LCH Group Holdings Limited and FTSE Global Debt Capital Markets Limited for cash consideration of £413 million and £39 million respectively. Group cash flow does not include cash and cash equivalents held by the Group’s Post Trade operations on behalf of their clearing members for use in their operations as managers of the clearing and guarantee systems. These balances represent margins and default funds held for counterparties for short periods in connection with these operations.

London Stock Exchange Group plc Annual Report 31 December 2019 147 Statements of changes in equity

Year ended 31 December 2019 Attributable to equity holders Total attributable Non- Ordinary Share Retained Other to equity controlling share capital premium earnings reserves holders interests Total equity Group Notes £m £m £m £m £m £m £m 31 December 2017 24 964 324 1,820 3,132 525 3,657 Profit for the year – – 480 – 480 73 553 Other comprehensive income for the year – – (18) 110 92 1 93 Issue of shares 29 – 1 – – 1 – 1 Final dividend relating to the year ended 31 December 2017 12 – – (129) – (129) – (129) Interim dividend relating to the year ended 31 December 2018 12 – – (60) – (60) – (60) Dividend payments to non-controlling interests – – – – – (42) (42) Employee share scheme expenses – – 38 – 38 – 38 Tax in relation to employee share scheme expenses – – 7 – 7 – 7 Purchase of non-controlling interest within acquired subsidiary – – (218) – (218) (202) (420) 31 December 2018 24 965 424 1,930 3,343 355 3,698 Impact of adoption of IFRS 16 2 – – (23) – (23) – (23) 1 January 2019 (restated) 24 965 401 1,930 3,320 355 3,675 Profit for the year – – 417 – 417 48 465 Other comprehensive income for the year – – 15 (134) (119) (12) (131) Issue of shares 29 – 2 – – 2 – 2 Final dividend relating to the year ended 31 December 2018 12 – – (151) – (151) – (151) Interim dividend relating to the year ended 31 December 2019 12 – – (70) – (70) – (70) Dividend payments to non-controlling interests – – – – – (44) (44) Employee share scheme expenses – – 37 – 37 – 37 Tax in relation to employee share scheme expenses – – 17 – 17 – 17 Purchase of non-controlling interest within acquired subsidiary – – 2 – 2 (1) 1 31 December 2019 24 967 668 1,796 3,455 346 3,801

The notes on pages 150 to 203 form an integral part of these consolidated financial statements.

Shares held in the Employee Benefit Trust to settle exercises of employee share awards were 517,563 (2018: 573,672).

Employee share scheme expenses include costs related to the issue and purchase of own shares for employee share schemes of £(5) million (2018: £(4) million), subscriptions, net of sundry costs, received on the vesting of employee share schemes of £5 million (2018: £6 million) and equity-settled share scheme expenses for the year of £37 million (2018: £36 million).

London Stock Exchange Group plc 148 Annual Report 31 December 2019 Group financial statements Statements of changes in equity

Purchase of non-controlling interests in the year relates to the Group’s acquisition of the remaining 30% of interest in EuroTLX SIM S.p.A. In the prior year, the Group acquired an additional 16.68% interest in LCH Group Holdings Limited and the remaining 27.26% interest in FTSE Global Debt Capital Markets Limited.

Other reserves comprise the following: Merger reserve of £1,305 million (2018: £1,305 million), a reserve that arose when the Company issued shares as part of the consideration to acquire subsidiary companies.

Capital redemption reserve of £514 million (2018: £514 million), a reserve set up as a result of a court approved capital reduction.

Reverse acquisition reserve of £(512) million (2018: £(512) million), a reserve arising on consolidation as a result of the capital reduction scheme.

Foreign exchange translation reserve of £535 million (2018: £740 million), a reserve reflecting the impact of foreign currency changes on the translation of foreign operations.

Hedging reserve of £(46) million (2018: £(117) million), a reserve representing the cumulative fair value adjustments recognised in respect of net investment and cash flow hedges undertaken in accordance with hedge accounting principles (note 19).

Year ended 31 December 2019 Attributable to equity holders Other reserves Total Capital attributable Ordinary Share Retained redemption Merger to equity share capital premium earnings reserve reserve holders Company Notes £m £m £m £m £m £m 31 December 2017 24 964 1,724 514 1,305 4,531

Profit for the year – – 141 – – 141 Issue of shares 29 – 1 – – – 1 Final dividend relating to the year ended 31 December 2017 12 – – (129) – – (129) Interim dividend relating to the year ended 31 December 2018 12 – – (60) – – (60) Employee share scheme expenses – – 25 – – 25 31 December 2018 24 965 1,701 514 1,305 4,509 Profit for the year – – 301 – – 301 Issue of shares 29 – 2 – – – 2 Final dividend relating to the year ended 31 December 2018 12 – – (151) – – (151) Interim dividend relating to the year ended 31 December 2019 12 – – (70) – – (70) Employee share scheme expenses – – 55 – – 55 31 December 2019 24 967 1,836 514 1,305 4,646

The notes on pages 150 to 203 form an integral part of these financial statements.

Employee share scheme expenses of the Company include movement in the fair value of loan balances with the Employee Benefit Trust of £15 million (2018: £(15) million), costs relating to the issue of own shares for employee share schemes of £(2) million (2018: £(2) million), subscriptions received on the vesting of employee share schemes of £5 million (2018: £6 million) and equity-settled share scheme expenses for the year of £37 million (2018: £36 million).

The merger reserve of £1,305 million (2018: £1,305 million) is a potentially distributable reserve that arose when the Company issued shares as part of the consideration to acquire subsidiary companies.

The capital redemption reserve of £514 million (2018: £514 million) is a non-distributable reserve set up as a result of a court approved capital reduction.

London Stock Exchange Group plc Annual Report 31 December 2019 149 Notes to the financial statements

1. Basis of preparation and accounting policies Recent accounting developments The Group’s consolidated and the Company’s financial statements are prepared The following standards and amendments have been endorsed by the EU and in accordance with International Financial Reporting Standards (IFRS) and IFRS adopted in these financial statements: Interpretations Committee (IFRIC) interpretations endorsed by the European ––IFRS 16, ‘Leases’ Union (EU), and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. ––IFRIC 23, ‘Uncertainty over Income Tax Treatments’ The principal accounting policies applied in the preparation of these financial ––Amendments to IAS 28, ‘Long-term interest in Associates and Joint Ventures’ statements are set out below. These policies have been consistently applied to all ––Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ the periods presented, unless otherwise stated. ––Amendments to IFRS 9, ‘Prepayment features with negative compensation’ The financial statements are prepared under the historical cost convention as modified by the revaluation of assets and liabilities held at fair value and on the ––Annual improvements to IFRS standards 2015-2017 basis of the Group’s accounting policies. The impact of adopting IFRS 16 on the Group’s financial results is described in The Group uses a columnar format for the presentation of its consolidated income detail in note 2. The adoption of the other amendments did not have a material statement. This enables the Group to aid the reader’s understanding of its results impact on the results of the Group. by presenting profit for the year before any non-underlying items. Non- underlying items include amortisation of purchased intangible assets and other The following standards and interpretations have been issued by the International income or expenses not considered to drive the operating results of the Group. Accounting Standards Board (IASB) and IFRIC, but have not been adopted because This is the profit measure used to calculate adjusted earnings per share. Profit they are not yet mandatory and the Group has not chosen to early adopt. The before non-underlying items is reconciled to profit before taxation on the face of Group plans to adopt these standards and interpretations when they become the income statement. effective. The impact on the Group’s financial statements of the future standards, amendments and interpretations is still under review, and where appropriate, a The Company is a public company, incorporated and domiciled in England and description of the impact of certain standards and amendments is provided below: Wales. The address of its registered office is 10 Paternoster Square, London, EC4M 7LS. International accounting standards and interpretations Effective date Amendments to References to the Conceptual Framework in As permitted by Section 408 of the Companies Act 2006, the Company’s income IFRS Standards 1 January 2020 statement has not been included in these financial statements. Amendments to IFRS 3, ‘Business Combinations’ 1 January 2020 Consolidation Amendments to IAS 1 and IAS 8: Definition of Material 1 January 2020 The consolidated financial statements comprise the financial statements of the Amendments to IFRS 9, IAS 39 & IFRS 7: Interest Rate Company and its subsidiary companies with all inter-company balances and Benchmark Reform 1 January 2020 transactions eliminated, together with the Group’s attributable share of the results IFRS 17, ‘Insurance Contracts’ 1 January 2021 of associates. The results of subsidiary companies sold or acquired in the period are included in the income statement up to, or from, the date that control passes. The above amendments and standards are not expected to have a material Control is achieved when the Group is exposed, or has rights, to variable returns impact on the results of the Group. from its involvement with the investee and has the ability to affect those returns through its power over the investee. The acquisition of subsidiary companies is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Upon completion of the Group’s fair value exercise, comparatives are revised up to 12 months after the acquisition date, for the final fair value adjustments. Further details are provided in Note 32. Adjustments to fair values include those made to bring accounting policies into line with those of the Group. The Group applies a policy of treating transactions with non-controlling interests through the economic entity model. Transactions with non-controlling interests are recognised in equity. Where the non-controlling interest has an option to dispose of their holding to the Group, then the amounts potentially due are recognised at their fair value at the balance sheet date. Investments in subsidiary companies’ shares, loans and other contributions are recognised at cost. These are reviewed for impairment when events indicate the carrying amount may not be recoverable and are accounted for in the Company’s financial statements at cost less accumulated impairment losses.

London Stock Exchange Group plc 150 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Accounting policies Income Statement Revenue The main source of the Group’s revenue is through fees for services provided. Revenue is measured based on the consideration specified in a contract with a customer. Amounts deducted from revenue relate to discounts, value added tax and other sales related taxes, revenue share arrangements whereby as part of an operating agreement amounts are due back to the customer and pass-through costs where the Group has arrangements to recover specific costs from its customers with no mark up. The Group recognises revenue as services are performed and as it satisfies its obligations to provide a product or service to a customer. Further details of the Group’s revenue accounting policy are set out below: Information The Information Services segment generates revenues from the provision of information and data products including Services indexes, benchmarks, real‑time pricing data and trade reporting and reconciliation services.

Data subscription and index licence fees are recognised over the licence or usage period as the Group meets its obligation to deliver data consistently throughout the licence period. Services are billed on a monthly, quarterly or annual basis.

Other information services include licences to the regulatory news service and reference data businesses. Revenue from licences that grant the right to access intellectual property are recognised over time, consistent with the pattern of the service provision and how the performance obligation is satisfied throughout the licence period. Revenues from other information services, including revenues from the sale of right to use licences, are recognised at the point the licence is granted or service is delivered. Post Trade – LCH, CC&G Revenues in the Post Trade segments are generated from clearing, settlement, custody and other post trade services. and Monte Titoli Clearing, settlement and custody services generate fees from trades or contracts cleared and settled, compression and custody services which are recognised as revenue at the point when the service is rendered on a per transaction basis, or in cases where there is a fixed annual fee – monthly in arrears.

Other post trade services include revenue from client connectivity services which is recognised as revenue on a straight‑line basis over the service period as this reflects the continuous transfer of services. Capital Markets Revenues in the Capital Markets segment are generated from Primary and Secondary market services.

Primary market initial admission and the ongoing listing services represent one performance obligation and the Group recognises revenue from initial admissions and further issues over the period the Group provides the listing services. All admission fees are billed to the customer at the time of admission to trading and become payable when invoiced.

Primary market annual fees, secondary markets membership and subscription fees are generally paid in advance on the first day of the membership or subscription period. The Group recognises revenue on a straight‑line basis over the period to which the fee relates, as this reflects the extent of the Group’s progress towards completion of the performance obligation under the contract.

Revenue from secondary market trading and associated capital market services is recognised as revenue on a per transaction basis at the point that the service is provided.

London Stock Exchange Group plc Annual Report 31 December 2019 151 Notes to the financial statements (continued)

Technology Technology revenue is generated from contracts to develop capital market technology solutions, software licences, network connections and hosting services.

Capital markets software licence contracts contain multiple deliverables for the provision of licences and software installation, and ongoing maintenance services. The transaction price for each contract is allocated to these performance obligations based upon the relative standalone selling price. Revenue is recognised based on the actual service provided during the reporting period, as a proportion of the total services to be provided. This is determined by measuring the inputs consumed in delivering the service (for example, material and actual labour) relative to the total expected input consumption over the contract. This best reflects the transfer of assets to the customer which generally occurs as the Group incurs costs on the contract.

Network connection and hosting services revenues are recognised on a straight‑line basis over the period to which the fee relates as this reflects the continuous transfer of technology services and measures the extent of progress towards the completion of the performance obligation. Other Fees are generated from the provision of events and media services, and are typically recognised as revenue at the point the service is rendered and becomes payable when invoiced.

Customer contracts across the Group that contain a single performance obligation at a fixed price do not require variable consideration to be constrained or allocated to multiple performance obligations. However certain businesses in the Group provide services to customers under a tiered and tariff pricing structure that generates a degree of variability in the revenue streams from the contract. Where the future revenue from a contract varies due to factors that are outside of the Group’s control, the Group limits the total transaction price at contract inception and recognises the minimum expected revenue guaranteed by the terms of the contract over the contract period. Any variable element is subsequently recognised in the period in which the variable factor occurs.

The Group does not have any contracts where the period between the transfer of services to a customer and when the customer is expected to pay for that service to be in excess of one year. Consequently, no adjustments are made to transaction prices for any financing component.

London Stock Exchange Group plc 152 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Other income Share‑based compensation Other income typically relates to property service charges. The Group operates a number of equity settled share‑based compensation plans for employees. The charge to the income statement is determined by the fair Cost of sales value of the options granted or shares awarded at the date of grant and recognised Cost of sales comprises data and licence fees, data feed costs, expenses incurred over the relevant vesting period. in respect of revenue share arrangements and costs incurred in the MillenniumIT business that are directly attributable to the construction and delivery of Foreign currencies customers’ goods or services, and any other costs linked and directly incurred to The consolidated financial statements are presented in Sterling, which is the generate revenues and provide services to customers. Company’s presentation and functional currency. Foreign currency transactions are converted into the functional currency of the reporting entity using the rate Revenue share expenses presented within cost of sales relate to arrangements ruling at the date of the transaction. Foreign exchange gains or losses resulting with customers where the revenue share payment is not limited to the amount of from the settlement of such transactions and from the translation at year‑end revenues receivable from the specific customer. rates of monetary assets and liabilities denominated in foreign currencies are Contract costs recognised in the income statement, except for differences arising on pension Incremental costs of obtaining a customer contract, such as sales commissions fund assets or liabilities which are recognised in other comprehensive income. paid to employees, are recognised as an intangible asset if the benefit of such The results and financial position of all Group entities that have a functional costs is expected to be longer than one year. The associated asset is amortised currency different from the presentation currency are converted into the over the period from which a customer benefits from existing software technology presentation currency as follows: supporting the underlying product or service, which the Group has determined to be between 3 to 5 years and is presented as an intangible asset in the Group’s a) assets and liabilities including goodwill, purchased intangible assets and fair consolidated balance sheet. The Group amortises the contract costs over the value adjustments are converted at the closing balance sheet rate; period from which a customer benefits from existing software technology b) income and expenses are translated and recorded in the income statement supporting the underlying product or service. at the average rate for the period; and The Group recognises the incremental cost of obtaining a contract as an expense c) all resulting exchange differences are recognised as a separate component when incurred, if the amortisation period is less than one year. of equity. Net treasury income Income recognised in the CCP clearing businesses includes net treasury income On consolidation, exchange differences arising from the translation of the net earned on margin and default funds, held as part of the risk management process. investment in foreign operations, and of borrowing and other currency Net treasury income is the result of interest earned on cash assets lodged with the instruments designated as hedges of such investments, are taken to shareholders’ clearing house, less interest paid to the members on their margin and default fund equity. When a foreign operation is partially disposed of or sold, exchange contributions. Net treasury income is shown separately from the Group’s revenues differences that were recorded in equity are recognised in the income statement on the face of the income statement to distinguish this income stream from as part of the gain or loss on sale. revenues arising from other activities and provide a greater understanding of the Finance income and expense operating activities of the Group. Where negative interest rates apply, the Group Finance income and expense comprises interest earned on cash deposited with recognises interest paid on cash assets as a treasury expense and interest financial counterparties and interest paid on borrowings which reflect the agreed received on clearing members’ margin as treasury income. market‑based or contractual rate for each transaction undertaken during the Non‑underlying items financial period and calculated using the effective interest rate method. In Items of income and expense that are material by size and/or nature and are conditions where negative interest rates apply, the Group recognises interest paid not considered to be incurred in the normal course of business are classified as on cash deposits as an expense and interest received on liabilities as income. non‑underlying items on the face of the income statement within their relevant Recurring fees and charges levied on committed bank facilities, cash category. The separate reporting of these items together with amortisation of management transactions and the payment services provided by the Group’s purchased intangible assets helps give an indication of the Group’s sustainable banks are charged to the income statement as accrued. Credit facility performance. Non‑underlying items are disclosed in note 8. arrangement fees are capitalised and then amortised back to the income Pension costs statement over the term of the facility subject to projected utilisation. Fees and The Group operates defined benefit and defined contribution pension schemes. charges are included within other finance costs. For the defined benefit schemes the service cost, representing benefits accruing Fair value gains and losses on financial instruments include the movement in the to employees, is included as an operating expense. The interest cost and expected market valuations of derivative instruments held as fair value hedges. return on plan assets is calculated by applying the discount rate to the net defined benefit liability or asset at the start of each annual reporting period. Actuarial gains and losses arising from experience adjustments, changes in actuarial assumptions or differences between actual and expected returns on assets are recognised at each period end net of tax in the statement of comprehensive income. The net asset or liability recognised on the balance sheet comprises the difference between the present value of pension obligations and the fair value of scheme assets. For defined contribution schemes, the expense is charged to the income statement as incurred.

London Stock Exchange Group plc Annual Report 31 December 2019 153 Notes to the financial statements (continued)

Balance Sheet The Group’s investments in associates are assessed for impairment at each balance Property, plant and equipment sheet date. Where indicators of impairment are identified a full impairment Property, plant and equipment are included in the financial statements at cost assessment is performed. Any difference between the recoverable amount of the less accumulated depreciation and any provision for impairment. associate and its carrying value is recognised as an impairment loss within ‘Share of profit or loss of associates’ in the Group consolidated income statement. Land is not depreciated. Freehold buildings, fixed plant and plant and equipment are depreciated to residual value on a straight‑line basis over their estimated Intangible assets useful economic lives as follows: Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised for non‑controlling interests a) Freehold buildings – 30 to 50 years; and any previous interest held, over the net identifiable assets acquired and b) Fixed plant – 3 to 20 years; and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, then the difference is recognised in profit or c) Plant and equipment – 3 to 15 years. loss as a gain on purchase. Leasehold improvements are included at cost and depreciated to residual value On the acquisition of a business, fair values are attributed to the assets and over the shorter of the period of the lease or the useful economic life of the asset. liabilities acquired. These may include brand names, customer and supplier Leases – right‑of‑use assets relationships, software licences and intellectual property, all of which are The Group recognises a right‑of‑use asset where the Group has control of an asset recorded as intangible assets and held at cost less accumulated amortisation. for a period of more than 12 months. Assets are recorded initially at cost These assets are amortised on a straight line basis over their useful economic and depreciated on a straight‑line basis over shorter of the lease term or the lives which are as follows: estimated useful life. Cost is defined as the lease liabilities recognised plus any a) Customer and supplier relationships – 2 to 25 years (material assets are initial costs and dilapidations provisions less any lease incentives received. amortised over a life exceeding 15 years); The lease term is the non‑cancellable term plus any optional extensions or less b) Brand names – 10 to 25 years (material assets are amortised over a life of 25 any reductions due to break clauses that in the judgement of management are years); and likely to be exercised. c) Software licences and intellectual property – 2 to 25 years (the majority of Lease liabilities material assets are amortised over a life not exceeding 5 years). Lease liabilities are recognised at the net present value of the future payments to be made over the lease term at the commencement of a lease. Where a lease includes The useful economic lives are based on management’s best estimates such as a break clause or extension option, management use their best estimate on the attrition rates on customer relationships, product upgrade cycles for software and likely outcome on a lease by lease basis. Variable lease payments based on an index technology assets, market participant perspective for brands and pace of change are estimated at the commencement date and revalued on an annual basis. of regulation for business. The net present value is determined using the incremental borrowing rate of the Third‑party software costs for the development and implementation of systems leasing entity. which enhance the services provided by the Group are capitalised and amortised over their estimated useful economic lives of 3 to 5 years. Lease payments due within the next 12 months are recognised within current liabilities; payments due after 12 months are recognised within non‑current Internal product development expenditure is capitalised if the costs can be payables. reliably measured, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group has sufficient Short‑term leases and leases of low value assets resources to complete the development and to use or sell the asset. The assets are Rental costs for leased assets that are for less than 12 months or are for assets recorded at cost including labour, directly attributable costs and any third‑party with an individual value of less than £5,000 are recognised directly in the income expenses, and amortised over their useful economic lives of 3 to 7 years. statement on a straight‑line basis over the life of the lease. Intangible assets are assessed for any indicators of impairment at each balance Group as lessor sheet date. Where indicators of impairment for a particular intangible asset are Where the Group sub‑lets a right‑of‑use asset for substantially all the useful life of identified, a full impairment assessment is performed, with any diminution in that asset, this is recognised as a finance lease. The asset is derecognised and a value recognised in the income statement. For assets with an indefinite useful life net investment in lease is recognised, equivalent to the net present value of the a full impairment assessment is performed annually. When performing any future receipts. impairment assessment, in addition to considering matters particular to the Where the value of the receipts is lower than the amount payable on the relevant Group business area, management evaluates the overall value of the asset head‑lease, a loss on disposal of the right‑of‑use asset is recognised. from the perspective of a market participant. Accordingly, any reduction in value is recorded to ensure the intangible asset is held at fair value. A right‑of‑use asset that is sub‑let for less than its expected useful life is recognised as an operating lease and rental income is recognised as received. The Group recognises an intangible right‑of‑use asset where the Group has control of an asset for a period of more than 12 months. Assets are recorded initially at Investments in associates cost and depreciated on a straight‑line basis over the life of the lease term. Cost is An associate is a company over which the Group has significant influence. defined as the lease liabilities recognised plus any initial costs. Significant influence is the power to participate in the financial and operating policy decisions of the company, but is not control nor joint control over those Current and non‑current classification policies. Current assets comprise assets held primarily for trading purposes, cash and cash equivalents, and assets expected to be realised within one year from the reporting The Group’s investments in associates are accounted for using the equity method. date, or intended for trade or consumption and realised in the course of the The Company accounts for its investments in associates at cost, less any Group’s operating cycle. All other assets are classified as non‑current assets. impairments recognised through the income statement. Current liabilities comprise liabilities held primarily for trading purposes, liabilities Under the equity method, investments are initially recognised at cost and expected to be settled in the course of the Group’s operating cycle and those adjusted thereafter to recognise the Group’s share of the post‑acquisition profits or liabilities due within one year from the reporting date. All other liabilities are losses and, if applicable, the Group’s share of movements in other comprehensive classified as non‑current liabilities. income. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment.

London Stock Exchange Group plc 154 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Current and deferred taxation ––Financial assets at fair value through other comprehensive income (FVOCI) – the The current income tax charge is calculated on the basis of the tax laws enacted or Group’s financial assets held at FVOCI consist of high‑quality government bonds substantively enacted at the balance sheet date in the countries where the that have a low credit risk. The Group’s policy is to calculate a 12‑month ECL on Company and its subsidiaries operate and generate taxable income. these assets. If there is a significant increase in credit risk, then a lifetime ECL will be calculated. A significant increase in credit risk is considered to have Full provision is made, using the liability method, for temporary differences occurred when contractual payments are more than 30 days past due. Equity arising between the tax bases of assets and liabilities and their carrying amounts instruments are revalued on a regular basis and impaired if necessary. in the financial statements. Deferred taxation is determined using tax rates that are substantively enacted at the balance sheet date and are expected to apply ––Financial assets at fair value through profit or loss (FVPL) – no ECL is calculated for when the asset is realised or liability settled. Deferred tax assets are recognised to assets held at FVPL as any expected loss is already recognised in the fair value. the extent it is probable that they will be recoverable against future taxable profits. Financial assets and financial liabilities are offset and the net amount reported in Financial instruments the balance sheet when there is a legally enforceable right to offset the recognised Financial assets and liabilities are initially recognised on their settlement date. The amounts and there is an intention to settle on a net basis or realise the asset and Group classifies its financial instruments as fair value through profit or loss (FVPL), settle the liability simultaneously. fair value through other comprehensive income (FVOCI) or amortised cost. The Investments in equity instruments classification depends on the Group’s business model for managing its financial Investments in equity instruments that do not give the Group control or instruments and whether the cash flows generated are ‘solely payments of significant influence of an entity, but are held for long‑term benefit are classified principal and interest’ (SPPI). as FVOCI. Dividend income received is recognised directly in the income Initial recognition: statement within operating profit. ––Financial assets at amortised cost are financial assets that are held in order to Cash and cash equivalents comprises cash at bank, short‑term deposits and collect the contractual cash flows and the contractual terms give rise to cash investments in money market funds, and other instruments and structures that flows that are solely payments of principal and interest. The Group’s cash and are readily convertible to known amounts of cash and are subject to insignificant cash equivalents and trade and other receivables fall within this category. risk of changes in value. Clearing member trading balances relating to sale and buy back transactions and other receivables from clearing members of the CCP businesses also fall Clearing member cash and cash equivalents represents amounts received from within this category. the clearing members to cover initial and variation margins and default fund contributions that are not invested in bonds. These amounts are deposited with ––Financial assets at fair value through other comprehensive income (FVOCI) are banks, including central banks, or invested securely in short-term reverse assets where the objective is achieved by both collecting the contractual cash repurchase contracts (reverse repos). flows or selling the asset. The contractual cash flows received are solely payments of principal and interest. This category includes investments in equity Fair value measurement instruments and quoted debt instruments (predominantly government bonds) All assets and liabilities for which fair value is measured are categorised within the held by the CCP businesses of the Group, which are used under the business fair value hierarchy which is described in detail in note 19. model to both collect the contractual cash flows and also to sell. Any profit or For assets and liabilities that are recognised at fair value on a recurring basis, the loss recognised in other comprehensive income on debt instruments is recycled Group determines whether transfers have occurred between levels in the hierarchy to the income statement if the asset is sold. Any profit or loss on an equity by re‑assessing categorisation at each balance sheet date. instrument remains in retained earnings and is not recycled through the income statement. Derivative financial instruments and hedging activities Derivatives are initially recognised at fair value on the date a derivative contract is ––Financial assets at fair value through profit or loss (FVPL) include all other entered into and are subsequently remeasured at their fair value at each balance financial assets not classified as amortised cost or FVOCI. This category includes sheet date. The method of recognising the resulting gain or loss depends on CCP businesses’ clearing member trading balances comprising derivatives, whether or not the derivative is designated as a hedging instrument, and the equity and debt instruments that are marked to market on a daily basis. nature of the item being hedged. ––Financial liabilities at fair value through profit or loss (FVPL) are liabilities that The Group applies fair value hedge accounting for hedging interest rate risk on must be held at fair value. This includes all the CCP businesses’ clearing member borrowings. Any gain or loss is on the hedging instrument is recognised in the trading balances, comprising derivatives, equity and debt instruments, which income statement within finance expense. are marked to market on a daily basis. The Group designates as cash flow hedges both foreign currency derivatives and ––Financial liabilities at amortised cost are all financial liabilities that are not hedges of interest rate movements associated with highly probable forecast included within financial liabilities at FVPL. This comprises the Group’s trade and transactions. Any gain or loss on the hedging instrument relating to the effective other payables balances, borrowings and other payables to clearing members. portion of the hedge is recognised in other comprehensive income. Subsequent measurement: The Group hedges a proportion of its net investment in its foreign subsidiaries by The Group adopts a forward‑looking approach to estimate impairment losses on designating Euro and US dollar borrowings and derivative instruments as net financial assets. An expected credit loss (ECL) is calculated based on the difference investment hedges. Any gain or loss on the hedging instrument relating to the between the contractual cash flows due and the expected cash flows. The effective portion of the hedge is recognised in other comprehensive income. difference is discounted at the asset’s original effective interest rate and recognised as an allowance against the original value of the asset. In order to qualify for hedge accounting, a transaction must meet strict criteria regarding documentation, effectiveness, probability of occurrence, and reliability ––Financial assets at amortised cost – the ECL for trade receivables, contract of measurement. The Group documents the relationship between hedging assets and cash and cash equivalents is calculated using IFRS 9’s simplified instruments and hedged items at the inception of the transaction, as well as its approach using lifetime ECL. The allowance is based on the Group’s historic risk management objectives and strategy for undertaking various hedging experience of collection rates, adjusted for forward looking factors specific to transactions. Effectiveness testing is conducted at each reporting date and at the each counterparty and the economic environment at large to create an commencement and conclusion of any hedge in order to verify that the hedge expected loss matrix. continues to satisfy all the criteria for hedge accounting to be maintained. The

ineffective portion is recognised in the income statement within finance expense. The ECL on other financial assets held at amortised cost is measured using the general approach. The Group calculates an allowance based on the 12‑month ECL at each reporting date until there is a significant increase in the financial instrument’s credit risk, at which point the Group will calculate a loss allowance based on the lifetime ECL, as described above for FVOCI assets.

London Stock Exchange Group plc Annual Report 31 December 2019 155 Notes to the financial statements (continued)

Amounts accumulated in other comprehensive income are recycled to the Commitments to purchase non‑controlling interests income statement in the period when the hedged item affects profit or loss Where the Group has granted put options to non‑controlling interest shareholders, (for example, when the forecast transaction that is hedged takes place). these are treated as liabilities as the Group has no control over whether these When a hedging instrument expires or is sold, or when a hedge no longer meets options are exercised or not. The amounts due are recognised at fair value and are the criteria for hedge accounting, any cumulative gain or loss existing at that revalued on each balance sheet date. When the liability is recognised initially, the time remains in other comprehensive income and is recycled to the income redemption amount is reclassified from non‑controlling interests. The changes in statement when the forecast transaction itself is ultimately recognised in the the fair value of the liability are recognised in the income statement. Changes in income statement. When a forecast transaction is no longer expected to occur, the measurement of the liability that do not change the relative interests in the the cumulative gain or loss that was reported in other comprehensive subsidiary company that are held by the parent and the non‑controlling interest income is immediately transferred to the income statement. shareholder are not equity transactions. Trade and other receivables Equity and related items Trade receivables are initially recognised at fair value and subsequently at Share capital amortised cost, less any loss allowance. The Group’s approach to calculating credit The share capital of the Company includes balances relating to the Company’s loss allowances is described above within the financial instruments policy. ordinary equity shares, own shares held by the Employee Benefit Trust and treasury shares held by the Company. Recoveries of amounts previously written off are credited in the income statement. When the Company issues new shares to the Employee Benefit Trust at par, the Other receivables are initially recognised at fair value and subsequently at share capital of the Company is increased by the par value of these own shares, amortised cost, less any loss allowance as described above. and a corresponding deduction or debit is recorded to the employee share Fees receivable scheme reserves within retained earnings. Fees receivable are recognised when the Group has an unconditional right to From time to time, the Company may also issue new shares to the Employee consideration in exchange for goods or services transferred, but no fee invoice has Benefit Trust to satisfy vesting of specific employee share schemes. These shares been formally issued. Amounts are transferred to trade receivables when a formal may be issued at a subscription price above par value, reflecting the option cost invoice has been issued. payable by the participant in the employee share scheme. In such instances, the Contract assets share capital of the Company is increased by the par value of these own shares Contract assets are recognised when the Group has the conditional right to and the difference between the subscription price and the par value of the own consideration from a customer in exchange for goods or services transferred. share is recorded in share premium. A corresponding deduction or debit is recognised in the employee share scheme reserves within retained earnings. Contract assets are transferred to trade or fees receivables when the entitlement to payment becomes unconditional and only the passage of time is required Shares reacquired by the Company from the open market as part of share before payment is due. buyback programmes are referred to as treasury shares and are held by the Company. The consideration payable is deducted from retained earnings. Contract liabilities Revenue relating to future periods is classified as a contract liability on the The par value of the treasury shares is then recorded as a transfer from the balance sheet to reflect the Group’s obligation to transfer goods or services to a Company’s ordinary equity shares to treasury shares within share capital. customer for which it has received consideration, or an amount of No gain or loss is recognised by the Company in the income statement on the consideration is due, from the customer. purchase, sale, issue or cancellation of the Company’s own shares held by the Contract liabilities are amortised and recognised as revenue in the income Employee Benefit Trust and treasury shares. statement over the period the services are rendered. Dividend distributions Borrowings Dividend distributions to the Company’s equity holders are recognised as a Borrowings are initially recorded at the fair value of amounts received, net of direct liability in the Group financial statements in the period in which the dividends issue costs and transaction costs (including upfront facility fees). Subsequently, are approved by the Company’s shareholders. The Group maintains a sustainable these liabilities are carried at amortised cost, and interest is charged to the progressive dividend policy. The interim dividend will generally be payable each income statement over the period of the borrowings using the effective interest year in September and final dividend in May. The Group’s dividend policy rate method. Similarly, direct issue costs and transaction costs (including upfront determines that the interim dividend is calculated as one‑third of the prior full facility fees) are charged to the income statement over the period of the year dividend. borrowings using the effective interest rate method. Provisions A provision is recognised where there is a present obligation, whether legal or constructive, as a result of a past event for which it is probable that a transfer of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the present value of the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, i.e. the present value of the amount that the Group would rationally pay to settle the obligation at the balance sheet date or to transfer it to a third party. Property provisions represent the present value of the Group’s estimate of the cost of fulfilling lease obligations for dilapidations on its right‑of‑use assets. All provisions are discounted where the time value of money is considered material. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance expense.

London Stock Exchange Group plc 156 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

2. Adoption of new accounting standards and interpretations On 1 January 2019, the Group adopted IFRS 16 ‘Leases’. The impact of adopting the new standard has been reflected through transition adjustments to the Group’s opening retained earnings at the start of the current year, as presented in the consolidated statement of changes in equity. The table below provides a summary of the impact at the date of transition:

As reported Impact of After adoption 31 December 2018 adoption 1 January 2019 Notes £m £m £m Property, plant and equipment 13 149 172 321 Investment in leases 24 – 3 3 Assets 149 175 324 Lease liabilities – current 24 4 39 43 Lease liabilities – non-current 24 1 162 163 Trade and other payables – accruals 23 355 (3) 352 Deferred tax liabilities 17 475 (4) 471 Provisions 28 12 4 16 Liabilities 847 198 1,045 Retained earnings 424 (23) 401 Equity 424 (23) 401

The Group adopted IFRS 16 on 1 January 2019 using the modified retrospective transitional arrangements and consequently the comparative amounts have not been restated. The standard requires the Group to recognise a ‘right‑of‑use’ asset where the Group has a long‑term arrangement to benefit from an asset which it controls in return for regular consideration (a lease). This definition includes the majority of the Group’s offices around the world, and these form the largest group of assets recognised on 1 January 2019. Other assets include motor vehicles. The Group has recognised right‑of‑use assets and corresponding liabilities for all leased assets, except for those with only short‑term commitment (less than 12 months) or for individual assets of a value less than £5,000. In such cases, the Group recognises the associated lease payments as an expense on a straight‑line basis over the lease term. Right‑of‑use assets for property or equipment are included within property, plant and equipment on the face of the balance sheet. Assets relating to the right‑of‑use of an intangible are included within intangible assets on the face of the balance sheet. The cost of right‑of‑use assets was calculated as if the Group had always applied the new standard but using an incremental borrowing rate calculated as at 31 December 2018. The value recognised for lease liabilities is the present value of the remaining lease payments, discounted to 1 January 2019 using the same rate. The following practical expedients have been applied by the Group: ––The use of hindsight to determine the lease term, if the contract included extensions or break clauses ––Application of the short‑term lease exemption to leases that expired before 31 December 2019 ––Excluding initial direct costs from the measurement of the cost of the asset ––Applying a single discount rate to groups of leases with similar characteristics, e.g. similar period and location A reconciliation of the new liabilities recognised to the amounts disclosed at 31 December 2018 as lease commitments is given below:

£m Lease commitments at 31 December 2018 226

Discounted lease commitments at 1 January 2019 198 Less: Lease liabilities recognised as short‑term leases (2) Add: Leases not previously recognised 5 Adjustments in respect of change in treatment of extension options 5 Lease liabilities as at 1 January 2019 206 Weighted average incremental borrowing rate as at 1 January 2019 2.4%

London Stock Exchange Group plc Annual Report 31 December 2019 157 Notes to the financial statements (continued)

3. Financial risk management The Group seeks to protect its financial performance and the value of its business from exposure to capital, credit, concentration, country, liquidity, settlement, custodial and market (including foreign exchange, cash flow and fair value interest rate) risks.

The Group’s financial risk management approach is not speculative and adopts a ‘3 lines of defence’ model. It is performed both at a Group level, where the treasury function identifies, evaluates and hedges financial risks from a Group perspective and locally, where operating units manage their regulatory and operational risks. This includes clearing operations at the Group’s CCPs (CC&G and LCH Group) that adhere to local regulation and operate under approved risk and investment policies.

The Group Chief Risk Officer’s team provides assurance that the governance and operational controls are effective to manage risks within the Board‑approved risk appetite, supporting a robust Group risk management framework. The Financial Risk Committee, a sub‑committee of the Group Executive Committee and chaired by the Chief Financial Officer, meets at least quarterly to oversee the consolidated financial risks of the Group. In addition, the Treasury Committee, a sub‑committee of the Financial Risk Committee (which is also chaired by the Chief Financial Officer), meets regularly to monitor the management of, and controls around foreign exchange, interest rate, credit and concentration risks and the investment of excess liquidity in addition to its oversight of the Group’s funding arrangements and credit ratings. Both committees provide the Group’s senior management with assurance that the treasury and risk operations are performed in accordance with Group Board approved policies and procedures. Regular updates, on a range of key criteria as well as new developments, are provided through the Enterprise‑Wide Risk Management Framework to the Group Risk Committee. See ‘Risk Management Oversight Supplement’ for further detail on the Group’s risk framework on our website at: www.lseg.com/about-london-stock-exchange-group/risk-management-oversight.

The UK’s exit from the EU leaves significant uncertainty concerning the political and regulatory environment, the UK’s future relationship with the EU, and the overall impact on the UK and EU economies both in the short and medium term. The UK companies within the Group, as members of the EU or European Economic Area (EEA), rely on a number of rights that are available to them to conduct business with other EU or EEA members. This includes, without limitation, the right for UK CCPs to offer clearing services to EU regulated firms under EMIR, and the right for UK trading venues to offer services to members in the EU or EEA. The Group companies have analysed the potential impacts and considered contingency plans that they may choose to execute should these rights not be replaced by rights that persist outside EU membership. The European Commission published in the Official Journal on 23 December 2019 an extension of temporary equivalence for UK CCPs for another twelve months, confirming LCH Ltd’s ability to continue to offer all clearing services for all products and services to all members and clients after 31 January 2020 even under a no‑deal Brexit scenario.

Capital risk Risk description Risk management approach The Group is profitable and strongly cash The Group focuses upon its overall cost of capital as it seeks, within the scope of its risk appetite, to provide generative and its capital base comprises equity superior returns to its shareholders, fulfil its obligations to the relevant regulatory authorities and other and debt capital. stakeholders and ensure that it is not overly dependent upon short and medium term debt that might not be available at renewal. Maintaining access to capital and flexibility to invest for growth is a key management However, the Group recognises the risk that its consideration. entities may not maintain sufficient capital to meet their obligations or they may make The Group can manage its capital structure and react to changes in economic conditions by varying returns to investments that fail to generate a positive or shareholders, issuing new shares or increasing or reducing borrowings. The Board reviews dividend policy and value enhancing return. funding capacity on a regular basis and the Group maintains comfortable levels of debt facility headroom. A high‑level summary of the Group’s capital structure is presented below: The Group comprises regulated and unregulated Book value of capital 2019 2018 entities. It considers that: £m £m ––increases in the capital requirements of its Total shareholders’ funds 3,455 3,343 regulated companies, or Group consolidated debt 2,085 2,203

––negative yields on its investments of cash, or Whilst the Company is unregulated, the regulated entities within the Group monitor compliance with the capital requirements set by their respective competent authorities and the terms of reference of the Financial Risk ––a scarcity of debt or equity (driven by its own Committee includes oversight of the Group’s Capital Management Policy. The Capital Management Policy seeks performance, its capital structure, or financial to ensure that capital is allocated optimally in order to maintain a prudent balance sheet and meet regulatory market conditions) requirements, drive growth and offer suitable returns to shareholders. Regulated entities within the Group have to date predominantly issued equity and held cash to satisfy their local regulatory capital requirements. either separately or in combination are the We believe that capital held by Group companies is sufficient to comfortably support current regulatory principal specific risks to managing its capital. frameworks. Whilst the level of amounts set aside for these purposes remains subject to ongoing review with regulators, particularly in Europe, total capital amounts are broadly in line year on year reflecting a relatively settled regulatory backdrop for the Group in 2019. The aggregate of the Group’s regulatory and operational capital is shown below: Regulatory and operational capital 2019 2018 £m £m Total regulatory and operational capital 1,231 1,203 Amount included in cash and cash equivalents 1,125 1,120

To maintain the financial strength to access new capital at reasonable cost and sustain an investment grade credit rating, the Group monitors its net leverage ratio which is operating net debt (i.e. net debt after excluding cash and cash equivalents set aside for regulatory and operational purposes) to proforma adjusted EBITDA (Group consolidated earnings before net finance charges, taxation, impairment, depreciation and amortisation, foreign exchange gains or losses and non‑underlying items, prorated for acquisitions or disposals undertaken in the period) against a target range of 1–2 times. The Group is also mindful of potential impacts on the key metrics employed by the credit rating agencies in considering increases to its borrowings. The Group seeks to maintain a strong investment grade credit rating over time and will therefore employ a credible plan to return to its target range in the event leverage rises temporarily due to a debt funded major investment.

As at 31 December 2019, net leverage was 1.4 times (2018: 1.8 times) and remains well within the Group’s target range. The Group is comfortably in compliance with its bank facility ratio covenants (net leverage and interest cover) and these measures do not inhibit the Group’s operations or its financing plans.

London Stock Exchange Group plc 158 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Credit and concentration risk Risk description Risk management approach The Group’s credit risk relates to its customers Group and counterparties being unable to meet their Credit risk is governed through policies developed at a Group level. Limits and thresholds for credit and obligations to the Group either in part or in full, concentration risk are kept under review. including: Group companies make a judgement on the credit quality of their customers based upon the customer’s ––customer receivables, financial position, the recurring nature of billing and collection arrangements and, historically, a low incidence of default. The Group is exposed to a large number of customers and so concentration risk on its ––repayment of invested cash and cash receivables is deemed low by management. The Group’s credit risk is equal to the total of its financial assets equivalents, and as shown in note 19. No estimated credit losses have been recognised on other financial instruments and there have been no significant increases in credit risk for these assets. ––settlement of derivative financial instruments. Non‑CCP entities In their roles as CCP clearers to financial market Credit risk associated with cash and cash equivalents is managed by limiting exposure to counterparties participants, the Group’s CCPs guarantee final with credit rating levels below policy minimum thresholds, potentially overlaid by a default probability settlement of transactions acting as buyer assessment. Except where specific approval is arranged to increase this limit for certain counterparties, towards each seller and as seller towards each investment limits of between £25 million and £100 million apply for periods ranging between a week and buyer. They manage substantial credit risks as 12 months, depending on counterparty credit rating and default probability risk. Derivative transactions and part of their operations including unmatched risk other treasury receivable structures are undertaken or agreed with well‑capitalised counterparties and are positions that might arise from the default of a authorised by policy to limit the credit risk underlying these transactions. party to a cleared transaction. For more information see ‘Principal Risks and CCPs Uncertainties’, pages 60 to 73. To address market participant and latent market risk, the Group’s CCPs have established financial safeguards against single or multiple defaults. Clearing membership selection is based upon supervisory capital, technical Not withstanding regulations that require CCPs to and organisational criteria. Each member must pay margins, computed and collected at least daily, to cover the invest predominantly in secured instruments or exposures and theoretical costs which the CCP might incur in order to close out open positions in the event of the structures (such as government bonds and reverse member’s default. Margins are calculated using established and internationally acknowledged risk models and repos), CC&G and the LCH Group CCPs are able to are debited from participants’ accounts through central bank accounts and via commercial bank payment maintain up to 5% of their total deposits at systems. Minimum levels of cash collateral are required. Non‑cash collateral is revalued daily. commercial banks on an unsecured basis. Through this potential for its CCPs to invest on an Clearing members also contribute to default funds managed by the CCPs to guarantee the integrity of the unsecured basis (as well as by certain other markets in the event of multiple defaults in extreme market circumstances. Amounts are determined on the regulated and unregulated operations observing basis of the results of periodic stress testing examined by the risk committees of the respective CCPs. agreed investment policy limits), the Group may Furthermore, each of the Group’s CCPs reinforces its capital position to meet the most stringent relevant continue to face some risk of direct loss from a regulatory requirements applicable to it, including holding a minimum amount of dedicated own resources deterioration or failure of one or more of its to further underpin the protective credit risk framework in the event of a significant market stress event or unsecured investment counterparties. participant failure.

Concentration risk may arise through Group An analysis of the aggregate clearing member contributions of margin and default funds across the CCPs is entities having large individual or connected shown below: exposures to groups of counterparties whose Total collateral held 2019 2018 likelihood of default is driven by common £bn £bn underlying factors. This is a particular focus of the investment approach at the Group’s CCPs. Cash received 93 81 Collateral security Non‑cash pledged 115 92 Guarantees pledged 4 2 Total collateral as at 31 December 2019 212 175 Maximum collateral held during the year 242 181

Investment counterparty risk for CCP margin and default funds is managed by investing the cash element in instruments or structures deemed ‘secure’ by the relevant regulatory bodies including through direct investments in highly rated, ‘regulatory qualifying’ sovereign bonds and supra‑national debt, investments in tri‑party and bilateral reverse repos (receiving high‑quality government securities as collateral) and, in certain jurisdictions, deposits with the central bank. The small proportion of cash that is invested unsecured is placed for short durations with highly rated counterparties where strict limits are applied with respect to credit quality, concentration and tenor.

2019 2018 £bn £bn Total investment portfolio 85 94 Maximum portfolio size during the year 122 103 Additional portfolio information: Amount invested securely 100% 98% Weighted average maturity (days) 90 49

Associated liquidity risks are considered in the investment mix and discussed further below.

To address concentration risk, the Group maintains a diversified portfolio of high‑quality, liquid investments and uses a broad range of custodians, payment and settlement banks and agents. The largest concentration of treasury exposures as at 31 December 2019 was 17% of the total investment portfolio to the French Government (2018: 17% to the French Government).

London Stock Exchange Group plc Annual Report 31 December 2019 159 Notes to the financial statements (continued)

Credit and concentration risk Risk description Risk management approach Trade and fees receivable An impairment analysis is performed monthly using a provision matrix to measure expected credit losses on trade and fees receivable. The calculation reflects current conditions and forecasts of future economic conditions. None of the Group’s trade receivables are material by individual counterparty.

Fees receivable <180 days >180 days Total At 31 December 2019 £m £m £m £m Expected credit loss rate <1% <1% 46% Total receivables 141 310 16 467 Expected credit loss – (2) (7) (9) 141 308 9 458

Fees receivable <180 days >180 days Total At 31 December 2018 £m £m £m £m Expected credit loss rate <1% <1% 19% Total receivables 139 380 52 571 Expected credit loss – (1) (10) (11) 139 379 42 560

Country risk Risk description Risk management approach

Distress can result from the risk that certain Specific risk frameworks manage country risk for both fixed income clearing and margin collateral and all clearing governments may be unable or find it difficult members’ portfolios are monitored regularly against a suite of sovereign stress scenarios. Investment limits and to service their debts. This could have adverse counterparty and clearing membership monitoring are sensitive to changes in ratings and other financial market effects, particularly on the Group’s CCPs, indicators, to ensure the Group’s CCPs are able to measure, monitor and mitigate exposures to sovereign risk and potentially impacting cleared products, margin respond quickly to anticipated changes. Risk Committees maintain an ongoing watch over these risks and the collateral, investments, the clearing membership associated policy frameworks to protect the Group against potentially severe volatility in the sovereign debt and the financial industry as a whole. markets.

The Group’s sovereign exposures of £1 billion or more at the end of either of the financial reporting periods shown below were:

Group Aggregate Sovereign Treasury Exposures 2019 2018 Country £bn £bn France 18 16 USA 12 9 Italy 11 2 EU 10 3 UK 6 4 Spain 1 – Netherlands – 7 Switzerland – 3 Germany – 1

London Stock Exchange Group plc 160 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Liquidity, settlement and custodial risk Risk description Risk management approach The Group’s operations are exposed to liquidity Group risk to the extent that they are unable to meet The combined Group businesses are profitable, generate strong free cash flow and operations are not their daily payment obligations. significantly impacted by seasonal variations. The Group maintains sufficient liquid resources to meet its financial obligations as they fall due and to invest in capital expenditure, make dividend payments, meet its In addition, the Group’s CCPs and certain other pension commitments, appropriately support or fund acquisitions or repay borrowings. Subject to regulatory Group companies must maintain a level of constraints impacting certain entities, funds can generally be lent across the Group and cash earnings liquidity (consistent with regulatory requirements) remitted through regular dividend payments by local companies. This is an important component of the to ensure the smooth operation of their respective Group Treasury cash management policy and approach. markets and to maintain operations in the event of a single or multiple market stress event or Management monitors forecasts of the Group’s cash flow and overlays sensitivities to these forecasts to member failure. This includes the potential reflect assumptions about more difficult market conditions or stress events. The Group will take the requirement to liquidate the position of a clearing appropriate actions to satisfy working capital requirements when committing to large scale acquisitions, member under a default scenario including including comfortable liquidity headroom projected over a reasonable timeframe. covering the associated losses and the settlement obligations of the defaulting member. Non‑CCP entities Treasury policy requires that the Group maintains adequate credit facilities provided by a diversified lending The Group is exposed to the risk that a payment group to cover its expected funding requirements and ensure a minimum level of headroom for at least the or settlement bank could fail or that its systems next 24 months. The financial strength of lenders to the Group is monitored regularly. encounter operational issues, creating liquidity pressures and the risk of possible defaults on During the year ended 31 December 2019, to improve its debt maturity profile, the Group approached its payment or receivable obligations. lenders to further extend the maturity of its 2017 arranged, five year, £600 million committed revolving credit facility by another year to 2024. To diversify and maintain its liquidity sources the Group continued to issue The Group uses third‑party custodians to hold Euro commercial paper under its £1 billion programme, with €300 million in issuance at the end of the securities and is therefore exposed to the financial period (2018: €300 million). At 31 December 2019, £934 million (2018: £1,159 million) of the Group’s custodian’s insolvency, its negligence, a misuse bank facilities were unutilised, with circa £250 million having been drawn to repay the Group’s 2009 issued of assets or poor administration. Bond which matured in the year. Facilities also provide swingline backstop coverage for the €300 million Euro commercial paper in issuance.

During the year, LSEG also arranged a Bridge Facility to facilitate a potential refinancing as it completes the acquisition of Refinitiv, announced on 1 August 2019. The facility is committed and structured with a US$9,325 million tranche and a €3,580 million tranche to provide funding capacity to precisely match the debt the Group will take on when the acquisition completes.

CCPs The Group’s CCPs maintain sufficient cash and cash equivalents and, in certain jurisdictions, have access to central bank refinancing or commercial bank liquidity support credit lines to meet the cash requirements of the clearing and settlement cycle. Revised regulations require CCPs to ensure that appropriate levels of back‑up liquidity are in place to underpin the dynamics of a largely secured cash investment requirement, ensuring that the maximum potential outflow under extreme market conditions is covered (see credit and concentration risk section above). The Group’s CCPs monitor their liquidity needs daily under normal and stressed market conditions.

Where possible, the Group employs guaranteed delivery versus payment settlement techniques and manages CCP margin and default fund flows through central bank or long‑established, bespoke commercial bank settlement mechanisms. Monies due from clearing members remain the clearing members’ liability if the payment agent is unable to effect the appropriate transfer. In addition, certain Group companies, including the CCPs, maintain operational facilities with commercial banks to manage intraday and overnight liquidity.

Custodians are subject to minimum eligibility requirements, ongoing credit assessment, robust contractual arrangements and are required to have appropriate back‑up contingency arrangements in place.

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. The amounts disclosed in the table reflect the contractual undiscounted cash flows. The borrowings line includes future interest on debt that is not accrued for in relation to bonds that are not yet due.

Less than Between 1 Between 2 Over 1 year and 2 years and 5 years 5 years Total At 31 December 2019 £m £m £m £m £m Borrowings 529 333 483 914 2,259 Trade and other payables (excluding lease liabilities) 560 – – – 560 Lease liabilities 39 41 90 36 206 Clearing member business liabilities 796,102 – – – 796,102 Derivative financial instruments 1 – 30 9 40 Other non‑current payables (excluding lease liabilities) – 4 – – 4 797,231 378 603 959 799,171

Less than Between 1 Between 2 Over 1 year and 2 years and 5 years 5 years Total At 31 December 2018 £m £m £m £m £m Borrowings 601 34 373 1,435 2,443 Trade and other payables 509 – – – 509 Clearing member business liabilities 835,508 – – – 835,508 Derivative financial instruments 30 – – 17 47 Other non‑current payables – 7 3 1 11 836,648 41 376 1,453 838,518

London Stock Exchange Group plc Annual Report 31 December 2019 161 Notes to the financial statements (continued)

Market risk – Foreign Exchange risk Risk description Risk management approach The Group operates primarily in the UK, Europe The Group seeks to match the currency of its debt liabilities to the currency of its earnings and cash flows and North America, but also has growing and which, to an extent, protects its key ratios (net leverage and interest coverage) and balances the currency of strategically important businesses in Asia, and its assets with its liabilities. In order to mitigate the impact of unfavourable currency exchange rate other alliances and investments across the globe. movements on earnings and net assets, non‑Sterling cash earnings are centralised and applied to matching Its principal currencies of operation are Sterling, currency debt and interest payments, and, where relevant, interest payments on Sterling debt Euro and US dollars. re‑denominated through the use of cross‑currency swaps.

Group companies generally invoice revenues, A material proportion of the Group’s debt is held in or swapped into Euros and US dollars as noted below. incur expenses and purchase assets in their 2019 2018 respective local currencies. As a result, foreign Currency of debt £m £m exchange risk arises mainly from the translation Euro denominated drawn debt 1,557 1,631 of the Group’s foreign currency earnings, assets and liabilities into its reporting currency, Sterling, Euro denominated cross‑currency interest rate swaps (637) (361) and from occasional, high value intragroup US dollar denominated drawn debt 107 – transactions. Exceptions exist including at US dollar denominated cross‑currency interest rate swaps 637 631 MillenniumIT (a Sri Lankan Rupee reporting entity) which invoices a material proportion of its During the year, the Group settled maturing Euro‑denominated cross‑currency interest rate swaps linked to revenues in US dollars, and at certain operations of the maturity of its 2009 issued £250 million bond. Therefore, at the end of the year, the remaining the LCH Group (a Euro reporting subsidiary), which cross‑currency interest rate swaps are directly linked to Euro fixed debt. The Euro and US dollar denominated generate material revenues in Sterling and US debt, including the cross‑currency swaps, provides a hedge against the Group’s net investment in Euro and dollars and incur material costs in Sterling. US dollar denominated entities. Intragroup dividends and the currency debt As at 31 December 2019, the Group’s designated hedges of its net investments were fully effective. interest obligations of the Company may create short‑term transactional FX exposures but play Whilst transactional foreign exchange exposure is limited, the Group hedges material transactions in accordance their part in controlling the level of translational with Group Treasury policy (which requires cash flows of single transactions or a series of linked transactions of FX exposures the Group faces. more than £5 million or equivalent per annum to be hedged) with appropriate derivative instruments or by settling currency payables or receivables within a short timeframe. Where appropriate, hedge accounting for The Group may be exposed from time to time to derivatives is considered in order to mitigate material levels of income statement volatility. FX risk associated with strategic investments in, In addition to projecting and analysing its earnings and debt profile by currency, the Group reviews or divestments from, operations denominated in sensitivities to movements in exchange rates which are appropriate to market conditions. The Group has currencies other than Sterling. considered movements in the Euro and the US dollar over the year ended 31 December 2019 and year ended 31 December 2018 and, based on actual market observations between its principal currency pairs, has concluded that a 10% movement in rates is a reasonable level to illustrate the risk to the Group. The impact on post tax profit and equity for the years ended 31 December is set out in the table below:

Post tax 2019 Post tax 2018 profit Equity profit Equity £m £m £m £m Euro Sterling weaken – 5 (2) (16) Sterling strengthen – (5) 2 15 US Dollar Sterling weaken (4) (55) 7 (45) Sterling strengthen 4 50 (7) 41

This reflects foreign exchange gains or losses on translation of Euro and US dollar denominated financial assets and financial liabilities, including Euro and US dollar denominated cash and borrowings. The impact on the Group’s operating profit for the year before amortisation of purchased intangible assets and non‑underlying items, of a 10 Euro cent and 10 US dollar cent movement in the Sterling‑Euro and Sterling‑US dollar rates respectively, can be seen below:

2019 2018 £m £m Euro Sterling weaken 32 27 Sterling strengthen (27) (23) US Dollar Sterling weaken 37 31 Sterling strengthen (31) (27)

London Stock Exchange Group plc 162 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Market risk – interest rate risk Risk description Risk management approach The Group’s interest rate risk arises through the Group interest rate management policy focuses on protecting the Group’s credit rating and maintaining impact of changes in market rates on cash flows compliance with bank covenant requirements. To support this objective, a minimum coverage of interest associated with cash and cash equivalents, expense by EBITDA of 7 times, and a maximum floating rate component of 50% of total debt are targeted. investments in financial assets and borrowings This approach reflects: held at floating rates. The Group may also face future interest rate exposure connected to (i) a focus on the Group’s cost of gross debt rather than its net debt given the material cash and cash equivalents committed M&A transactions where significant set aside for regulatory purposes; debt financing is involved. (ii) the short duration allowed for investments of cash and cash equivalents held for regulatory purposes which, The Group’s CCPs face interest rate exposure through the impact of changes in the reference by their nature, generate low investment yields; rates used to calculate member liabilities versus (iii) a view currently maintained that already low market yields are unlikely to move materially lower; and the yields achieved through their predominantly secured investment activities. (iv) the broad natural hedge of floating rate borrowings provided by the significant balances of cash and cash equivalents held effectively at floating rates of interest.

As at 31 December 2019, consolidated net interest expense cover by EBITDA was measured over the 12‑month period at 14.4 times (2018: 16.1 times) and the floating rate component of total debt was 25% (2018: 14%).

Where the Group has committed to M&A transactions and is exposed to prospective interest rate risk on borrowings the Group Treasury function will consider the exposure and recommend hedging solutions that conform with policy and seek to limit future interest costs. The acquisition of Refinitiv will meaningfully increase the Group’s debt and the interest rate risk exposure was evaluated during the financial period. As at 31 December 2019, no hedging had been arranged but the exposure remains under ongoing review.

In the Group’s CCPs, interest bearing assets are generally invested in secured instruments or structures and for a longer term than interest bearing liabilities, whose interest rate is reset daily. This makes investment revenue vulnerable to volatility in overnight rates and shifts in spreads between overnight and term rates. Interest rate exposures (and the risk to CCP capital) are managed within defined risk appetite parameters against which sensitivities are monitored daily.

In its review of the sensitivities to potential movements in interest rates, the Group has considered interest rate volatility over the last year and prospects for rates over the next 12 months and has concluded that a 1 percentage point upward movement (with a limited prospect of material downward movement) reflects a reasonable level of risk to current rates. At 31 December 2019, at the Group level, if interest rates on cash and cash equivalents and borrowings had been 1 percentage point higher with all other variables held constant, post tax profit for the year would have been £8 million higher (2018: £8 million higher) mainly as a result of higher interest income on floating rate cash and cash equivalents partially offset by higher interest expense on floating rate borrowings.

At 31 December 2019, at the CCP level (in aggregate), if interest rates on the common interest bearing member liability benchmarks of Eonia, Fed Funds and Sonia, for Euro, US dollar and Sterling liabilities respectively, had been 1 percentage point higher, with all other variables held constant, the daily impact on post tax profit for the Group would have been £2 million lower (2018: £2 million lower). This deficit is expected to be recovered as investment yields increase as the portfolio matures and is reinvested.

London Stock Exchange Group plc Annual Report 31 December 2019 163 Notes to the financial statements (continued)

4. Significant judgements and estimates Judgements and estimates are regularly evaluated based on historical experience, current circumstances and expectations of future events. Estimates For the year ended 31 December 2019, the following areas require the use of estimates:

––Impairment of intangible assets, goodwill and investment in subsidiaries – these assets form a significant part of the balance sheet and are key assets for the cash generating business in the Group. The recoverable amounts of relevant cash generating units are based on value in use calculations using management’s best estimate of future performance and estimates of the return required by investors to determine an appropriate discount rate. Details are provided in note 14; ––Defined benefit pension asset or liability – determined based on the present value of future pension obligations using assumptions determined by the Group with advice from an independent qualified actuary. Sensitivity analysis is provided in note 18; and ––Estimated service period for admission and listing services within the Primary Markets business – the Group determines the estimated period for admission services using historical analysis of listing durations in respect of the companies on our markets. The estimated service period inherently incorporates an element of uncertainty in relation to the length of a customer listing which is subject to factors outside of the Group’s control. The estimated service periods are reassessed at each reporting date to ensure the period reflects the Group’s best estimates. The Group estimates that a one year decrease in the deferral period would cause an estimated £19 million increase in revenue and a one year increase in the deferral period would cause an estimated £17 million decrease in revenue recognised in the year.

Judgements: In preparing the financial statements for the year ended 31 December 2019, the following judgement has been made: ––Clearing member trading assets and trading liabilities – The Group uses its judgement to carry out the offsetting within clearing member balances. The carrying values of the balances are offset at what the Group considers an appropriate level to arrive at the net balances reported in the balance sheet. The Group has an aligned approach for its CCP subsidiaries to ensure the principles applied are consistent across similar assets and liabilities. The approach is reviewed on a timely basis to ensure the approach used is the most appropriate. Details of amounts offset are provided in note 20. ––EU State Aid – The Group has used its judgement to assess any obligations arising in relation to EU State Aid investigations. Considering the appeals made by the UK PLCs (including the Group), UK Government, and management’s internal view, the Group does not consider any provision is required in relation to this investigation. Additional details are provided in note 10.

5. Segmental information The Group is organised into operating units based on its service lines and has six reportable segments: Information Services, Post Trade Services – LCH, Post Trade Services – CC&G and Monte Titoli, Capital Markets, Technology Services and Other. These segments generate revenue in the following areas: ––Information Services – Subscription and licence fees for data and index services provided; ––Post Trade Services – LCH – Fees based on CCP and clearing services provided, non‑cash collateral management and net interest earned on cash held for margin and default funds; ––Post Trade Services – CC&G and Monte Titoli – Clearing fees based on trades and contracts cleared, net interest earned on cash, securities held for margin and default funds, and fees from settlement and custody services; ––Capital Markets – Admission fees from initial listing and further capital raises, annual fees charged for securities traded on the Group’s markets, and fees from our secondary market services; ––Technology Services – Capital markets software licences and related IT infrastructure, network connection and server hosting services; and ––Other – Includes events and media services. The Executive Committee monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. The Executive Committee primarily uses a measure of adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) to assess the performance of the operating segments. Sales between segments are carried out at arm’s length and are eliminated on consolidation.

London Stock Exchange Group plc 164 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Segmental disclosures for the year ended 31 December 2019 are as follows:

Post Trade Post Trade Services – Information Services – CC&G and Capital Technology Services LCH Monte Titoli Markets Services Other Eliminations Group £m £m £m £m £m £m £m £m Revenue from external customers 902 550 103 426 66 9 – 2,056 Inter‑segmental revenue – – – – 17 – (17) – Revenue 902 550 103 426 83 9 (17) 2,056 Net treasury income from CCP clearing business – 206 49 – – – – 255 Other income – – – – – 3 – 3 Total income 902 756 152 426 83 12 (17) 2,314 Cost of sales (74) (114) (7) (5) (7) (3) – (210) Gross profit 828 642 145 421 76 9 (17) 2,104 Income from equity investments – 7 – – – – – 7 Share of loss after tax of associates – – – (1) – (6) – (7) Earnings before interest, tax, depreciation, amortisation and impairment 505 415 101 228 56 (34) (6) 1,265 Underlying depreciation, amortisation and impairment (56) (76) (9) (32) (25) (6) 4 (200) Operating profit/(loss) before non‑underlying items 449 339 92 196 31 (40) (2) 1,065 Amortisation and impairment of goodwill and purchased intangible assets (195) Other non‑underlying items (132) Operating profit 738 Net finance expense including non‑underlying items (87) Profit before tax 651

Revenue from external customers principally comprises fees for services rendered of £1,981 million (2018: £1,837 million) and Technology Services of £66 million (2018: £65 million). Net treasury income from CCP clearing businesses of £255 million (2018: £218 million) comprises gross interest income of £1,337 million (2018: £1,025 million) less gross interest expense of £1,082 million (2018: £807 million). During the year the Group recognised a total of £29 million (2018: £106 million) of net treasury income on financial assets and liabilities held at amortised cost comprising £1,028 million (2018: £732 million) gross treasury income and £999 million (2018: £626 million) gross treasury expense. £226 million net income (2018: £112 million net gain) on assets held at fair value was recognised, comprising £309 million (2018: £293 million) income and £83 million (2018: £181 million) expense. Presented within revenue are net settlement expenses from the CCP clearing businesses of net nil (2018: £2 million) which comprise gross settlement income of £30 million (2018: £24 million) less gross settlement expense of £30 million (2018: £26 million). The Group’s revenue from contracts with customers disaggregated by segment, major product and service line, and timing of revenue recognition for the year ended 31 December 2019 is shown below:

Post Trade Post Trade Services – Information Services – CC&G and Capital Technology Services LCH Monte Titoli Markets Services Other Group £m £m £m £m £m £m £m Revenue from external customers Major product & service lines FTSE Russell Indexes – subscription 418 – – – – – 418 FTSE Russell Indexes – asset based 231 – – – – – 231 Real time data 97 – – – – – 97 Other information services 156 – – – – – 156 Clearing – 550 43 – – – 593 Settlement, custody and other – – 60 – – – 60 Primary capital markets – – – 151 – – 151 Secondary capital markets – equities – – – 151 – – 151 Secondary capital markets – fixed income, derivatives and other – – – 124 – – 124 Capital markets software licences – – – – 66 – 66 Other – – – – – 9 9 Total revenue from contracts with customers 902 550 103 426 66 9 2,056 Timing of revenue recognition Services satisfied at a point in time 42 544 95 283 4 7 975 Services satisfied over time 860 6 8 143 62 2 1,081 Total revenue from contracts with customers 902 550 103 426 66 9 2,056

London Stock Exchange Group plc Annual Report 31 December 2019 165 Notes to the financial statements (continued)

Segmental disclosures for the year ended 31 December 2018 are as follows:

Post Trade Post Trade Services – Information Services – CC&G and Capital Technology Services LCH Monte Titoli Markets Services Other Eliminations Group £m £m £m £m £m £m £m £m Revenue from external customers 841 487 102 407 65 9 – 1,911 Inter‑segmental revenue – – 1 – 21 – (22) – Revenue 841 487 103 407 86 9 (22) 1,911 Net treasury income from CCP clearing business – 175 43 – – – – 218 Other income – – – – – 6 – 6 Total income 841 662 146 407 86 15 (22) 2,135 Cost of sales (70) (123) (7) (16) (9) (2) – (227) Gross profit 771 539 139 391 77 13 (22) 1,908 Share of loss after tax of associates – – – (1) – (7) – (8) Earnings before interest, tax, depreciation, amortisation and impairment 469 304 92 201 18 (5) (13) 1,066 Underlying depreciation, amortisation and impairment (29) (62) (9) (17) (20) (2) 4 (135) Operating profit/(loss) before non‑underlying items 440 242 83 184 (2) (7) (9) 931 Amortisation and impairment of goodwill and purchased intangible assets (159) Other non‑underlying items (21) Operating profit 751 Net finance expense (66) Profit before tax 685

The Group’s revenue from contracts with customers disaggregated by segment, major product and service line, and timing of revenue recognition for the year ended 31 December 2018 is shown below:

Post Trade Post Trade Services – Information Services – CC&G and Capital Technology Services LCH Monte Titoli Markets Services Other Group £m £m £m £m £m £m £m Revenue from external customers Major product & service lines FTSE Russell Indexes – subscription 373 – – – – – 373 FTSE Russell Indexes – asset based 219 – – – – – 219 Real time data 94 – – – – – 94 Other information services 155 – – – – – 155 Clearing – 487 41 – – – 528 Settlement, custody and other – – 61 – – – 61 Primary capital markets – – – 113 – – 113 Secondary capital markets – equities – – – 169 – – 169 Secondary capital markets – fixed income, derivatives and other – – – 125 – – 125 Capital markets software licences – – – – 65 – 65 Other – – – – – 9 9 Total revenue from contracts with customers 841 487 102 407 65 9 1,911 Timing of revenue recognition Services satisfied at a point in time 45 479 93 237 2 8 864 Services satisfied over time 796 8 9 170 63 1 1,047 Total revenue from contracts with customers 841 487 102 407 65 9 1,911

31 December 2018 comparatives have been re‑presented inline with current year classification.

London Stock Exchange Group plc 166 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Geographical disclosures

2019 2018 £m £m Revenue from external customers UK 1,149 1,092 USA 388 348 Italy 327 316 France 144 109 Other 48 46 Total 2,056 1,911 Non‑current operating assets UK 1,492 1,149 USA 2,113 2,226 Italy 1,203 1,271 France 74 61 Other 96 154 Total 4,978 4,861

Non‑current operating assets consist of property, plant and equipment, intangible assets, investment in associates and strategic long‑term investments in equity instruments.

6. Expenses by nature Expenses comprise the following:

2019 2018 Notes £m £m Employee costs 7 529 510 IT costs 146 136 Short‑term lease costs 2 – Lease costs for low value items 2 – Other costs 163 193 Foreign exchange gains (3) (5) Underlying operating expenses before depreciation, amortisation and impairment 839 834 Non‑underlying operating expenses before depreciation, amortisation and impairment 8 132 21 Operating expenses before depreciation, amortisation and impairment 971 855

Other costs include £49 million in relation to professional fees (2018: £60 million). Previously property costs included within other costs are now recognised as depreciation under IFRS 16 (note 2).

7. Employee costs Employee costs comprise the following:

2019 2018 Note £m £m Salaries and other benefits 397 387 Social security costs 71 62 Pension costs 18 26 25 Share‑based compensation 35 36 Total 529 510

Staff costs include the costs of contract staff who are not on the payroll, but fulfil a similar role to employees.

The average number of employees in the Group from total operations was:

2019 2018 UK 1,631 1,628 USA 664 659 Italy 643 612 France 185 166 Sri Lanka 1,082 1,025 Other 493 315 Total 4,698 4,405

Average staff numbers are calculated from the date of acquisition for subsidiary companies acquired in the year and up to the date of disposal for businesses disposed in the year.

The Company had no employees in the year (2018: nil).

London Stock Exchange Group plc Annual Report 31 December 2019 167 Notes to the financial statements (continued)

8. Non‑underlying items

2019 2018 Note £m £m Amortisation and impairment of intangible assets 14 195 159

Transaction costs 96 9 Restructuring costs 32 – Integration costs 4 12 Operating expenses before depreciation, amortisation and impairment 132 21 Total affecting operating profit 327 180 Non‑underlying finance expense 16 – Total affecting profit before tax 343 180 Tax effect on items affecting profit before tax Deferred tax on amortisation of purchased intangible assets (31) (33) Current tax on amortisation of purchased intangible assets (11) (11) Tax effect on other items (8) (11) Total tax effect on items affecting profit before tax (50) (55) Total non-underlying charge to income statement 293 125

During the year the Group incurred a £180 million (2018: £154 million) amortisation charge in relation to purchased intangible assets, which includes £25 million accelerated amortisation in relation to Mergent Inc. In the prior year £5 million expense was recognised in relation to written-off work in progress assets no longer required for development.

The Group impaired goodwill of £8 million and purchased intangible assets of £1 million in relation to Turquoise Global Holdings Ltd and the Group impaired goodwill of £6 million in relation to Mergent Inc (note 14).

Transaction costs comprise charges incurred for services relating to potential merger and acquisition transactions.

Restructuring costs comprise one-off implementation costs arising from the cost savings programme announced in March 2019.

Integration costs in the current and prior year relate to the activities to integrate the Mergent and Yield Book businesses into the Group.

Financing costs relate to fees for establishing a Bridge Financing to refinance the Refinitiv notes and term loans in full following completion of its proposed acquisition. Further details of the facility are provided in note 26.

Further details on the recognition of deferred tax in relation to the amortisation of purchased intangible assets are provided in note 17.

9. Net finance expense

2019 2018 Notes £m £m Finance income Expected return on defined benefit pension scheme assets 18 1 1 Bank deposit and other interest income 9 8 Other finance income 4 4 Underlying finance income 14 13 Finance expense Interest payable on bank and other borrowings (73) (72) Defined benefit pension scheme interest cost 18 – (1) Lease interest payable 24 (4) – Other finance expenses (8) (6) Underlying finance expense (85) (79) Non‑underlying (16) – Net finance expense (87) (66)

Bank deposits and other income includes negative interest earned on the Group’s borrowings. Interest payable includes amounts where the Group earns negative interest on its cash deposits.

Other finance income includes amounts relating to the unwind of discount on net investments in leases. These amounts are immaterial.

During the year the Group recognised a total of £72 million (2018: £66 million) of net interest expense on financial assets and financial liabilities held at amortised cost, comprising £13 million (2018: £12 million) gross finance income and £85 million (2018: £78 million) gross finance expense. Presented within finance income and finance expense are amounts in relation to defined benefit pension schemes which are measured at fair value.

London Stock Exchange Group plc 168 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

10. Taxation The standard UK corporation tax rate for the year was 19% (2018: 19%).

2019 2018 Taxation charged to the income statement Note £m £m Current tax UK corporation tax for the year 84 53 Overseas tax for the year 134 107 Adjustments in respect of previous years (3) (12) 215 148 Deferred tax: 17 Deferred tax for the year 2 15 Adjustments in respect of previous years – 2 Deferred tax on amortisation of purchased intangible assets (31) (33) (29) (16) Total taxation charge 186 132

The adjustments in respect of previous years’ corporation tax are mainly in respect of tax returns submitted to relevant tax authorities.

2019 2018 Taxation on items not recognised in the income statement £m £m Current tax credit: Tax allowance on share awards in excess of expense recognised 7 5 7 5 Deferred tax (charge)/credit: Tax on defined benefit pension scheme remeasurement (2) 5 Adjustments relating to change in defined benefit pension tax rate 2 – Tax allowance on share options/awards in excess of expense recognised 10 2 Tax on movement in value of investments in financial assets (5) 4 12 16

Factors affecting the tax charge for the year The income statement tax charge for the year differs from the standard rate of corporation tax in the UK of 19% (2018: 19%) as explained below:

2019 2018 £m £m Profit before tax 651 685 Profit multiplied by standard rate of corporation tax in the UK 124 130 Expenses not deductible/(income not taxable) 9 (7) Adjustment arising from change in tax rates 7 – Overseas earnings taxed at higher rate 38 25 Adjustments in respect of previous years (3) (10) Adjustment arising from changes in tax rates on amortisation of purchased intangible assets 4 (2) Deferred tax provided for withholding tax on distributable reserves 2 – Derecognition of deferred tax 5 (4) Taxation 186 132

The UK Finance Bill 2016 was enacted in September 2016, reducing the standard rate of corporation tax to 17% effective from 1 April 2020. Accordingly, the UK deferred tax balances at December 2019 have been stated at the rate dependent on when the temporary differences are expected to reverse. The deferred tax balances in other countries are recognised at the substantively enacted rates at the balance sheet date.

London Stock Exchange Group plc Annual Report 31 December 2019 169 Notes to the financial statements (continued)

Uncertain tax positions EU State Aid The Group continues to monitor developments in relation to EU State Aid investigations. On 25 April 2019, the EU Commission’s final decision regarding its investigation into the UK’s Controlled Foreign Company (CFC) regime was published. It concludes that the legislation up until December 2018 does partially represent State Aid.

Both the Group and the UK Government, among a number of other UK PLCs, have since submitted appeals to the EU general court to annul the EU Commission’s findings.

The UK Government are required to commence the process of recovering the State Aid while the decision is under appeal, issuing their first round of determinations in December 2019 focusing on the financial year 2015 due to the expiry of certain time limits.

The Group received a determination in respect of one of its two affected subsidiaries for £1 million, which was both paid by the Group and appealed against separately to HMRC in January 2020. The appeal against the determination to HMRC is likely to stay until the conclusion of the appeals to the EU general court to annul the original EU Commission’s decision.

Considering the appeals made by the UK PLCs (including the Group), UK Government, and management’s internal view, the Group does not consider any provision is required in relation to this investigation. Additionally, in accordance with the provisions of IFRIC 23 ‘Uncertainty over Income Tax Treatments’ and IAS 12 ‘Income Taxes’, the Group will recognise a receivable for the determination paid in January 2020.

As previously disclosed, the Group has made claims under the CFC legislation and considers that the potential amount of tax payable, excluding compound interest, remains between nil and £65 million.

Other The Group does not have any other uncertain tax positions as at 31 December 2019 (2018: nil).

11. Earnings per share Earnings per share is presented on four bases: basic earnings per share, diluted earnings per share, adjusted basic earnings per share, and adjusted diluted earnings per share. Basic earnings per share is in respect of all activities. Diluted earnings per share takes into account the dilutive effects that would arise on conversion or vesting of all outstanding share options and share awards under the Group’s share option and award schemes. Adjusted basic earnings per share and adjusted diluted earnings per share exclude amortisation of purchased intangible assets and non‑underlying items to enable a better comparison of the underlying earnings of the business with prior periods.

2019 2018 Basic earnings per share 119.5p 138.3p Diluted earnings per share 118.1p 136.0p Adjusted basic earnings per share 200.3p 173.8p Adjusted diluted earnings per share 198.0p 170.8p

Profit and adjusted profit for the year attributable to the Company’s equity holders:

2019 2018 £m £m Profit/(loss) for the financial year attributable to the Company’s equity holders 417 480 Adjustments Total non‑underlying items (note 8) 293 125 Amortisation of purchased intangible assets, non‑underlying items and taxation attributable to non‑controlling interests (11) (2) Adjusted profit for the year attributable to the Company's equity holders 699 603

2019 2018 Weighted average number of shares – millions 349 347 Effect of dilutive share options and awards – millions 4 6 Diluted weighted average number of shares – millions 353 353

The weighted average number of shares excludes those held in the Employee Benefit Trust and treasury shares held by the Group.

12. Dividends

2019 2018 £m £m Final dividend for 31 December 2017 paid 30 May 2018: 37.2p per Ordinary share – 129 Interim dividend for 31 December 2018 paid 18 September 2018: 17.2p per Ordinary share – 60 Final dividend for 31 December 2018 paid 29 May 2019: 43.2p per Ordinary share 151 – Interim dividend for 31 December 2019 paid 17 September 2019: 20.1p per Ordinary share 70 – 221 189

Dividends are only paid out of available distributable reserves of the Company.

The Board has proposed a final dividend in respect of the year ended 31 December 2019 of 49.9p per share, which is estimated to amount to an expected payment of £174 million in May 2020. This is not reflected in the financial statements.

London Stock Exchange Group plc 170 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

13. Property, plant and equipment

Land & Buildings Property Freehold right‑of‑use Leasehold Plant and property assets improvements equipment Total Cost £m £m £m £m £m 31 December 2017 51 – 52 216 319 Additions 5 – 8 44 57 Disposals – – (5) (4) (9) Write off – – – (2) (2) Transfers – – – (3) (3) Foreign exchange (1) – – – (1) 31 December 2018 55 – 55 251 361 Impact of adoption of IFRS 16 (note 2) – 170 – 2 172 1 January 2019 (restated) 55 170 55 253 533 Additions 4 – 3 41 48 Acquisition of subsidiaries – 1 – – 1 Disposals and write‑offs – (5) (5) (15) (25) Transfers (2) – 7 (6) (1) Foreign exchange – (3) (1) (7) (11) 31 December 2019 57 163 59 266 545

Accumulated depreciation and impairment 31 December 2017 29 – 37 124 190 Disposals – – (5) (4) (9) Charge for the year – – 4 27 31 31 December 2018 29 – 36 147 212 Disposals – (3) (3) (13) (19) Charge for the year – 26 6 34 66 Impairment – 2 – – 2 Foreign exchange – – – (4) (4) 31 December 2019 29 25 39 164 257

Net book values 31 December 2019 28 138 20 102 288 31 December 2018 26 – 19 104 149

The Group leases a number of properties in the countries in which it operates and these are represented above as property right‑of‑use assets.

Disposals of right‑of‑use assets represent office space that is no longer used by the Group. A loss of £2 million was recognised on the derecognition of these assets.

Plant and equipment includes right‑of‑use assets with a cost of £2 million and depreciation charges of £1 million.

Transfers relate to reclassification of property, plant and equipment to other asset classes and reallocations of work in progress assets between property, plant and equipment types.

During the prior year the Group incurred a £2 million asset write‑off expense presented as a non‑underlying item in the Group’s consolidated income statement in relation to IT hardware work in progress which is no longer required for development as a result of the integration of Yield Book into the Group. There are no similar expenses in the current year.

The Company has no property, plant and equipment (2018: nil).

London Stock Exchange Group plc Annual Report 31 December 2019 171 Notes to the financial statements (continued)

14. Intangible assets

Purchased intangible assets Software, Customer and licences and supplier intellectual Software and Goodwill relationships Brands property other Total Cost £m £m £m £m £m £m 31 December 2017 2,377 1,848 960 584 678 6,447 Additions – – – – 187 187 Disposals – (6) – (14) (4) (24) Transfer of asset – – – – 3 3 Write‑off – – – – (5) (5) Foreign exchange 70 50 45 12 13 190 31 December 2018 2,447 1,892 1,005 582 872 6,798 Acquisition of subsidiaries 14 – – – – 14 Additions – – – – 206 206 Disposals and write‑off – (2) (1) (2) (16) (21) Foreign exchange (104) (64) (24) (12) (39) (243) 31 December 2019 2,357 1,826 980 568 1,023 6,754

Accumulated amortisation and impairment 31 December 2017 521 566 151 291 317 1,846 Amortisation charge for the year – 91 39 24 102 256 Impairment – – – – 1 1 Disposals – (6) – (14) (4) (24) Write‑off – – – – (1) (1) Foreign exchange 7 11 7 3 5 33 31 December 2018 528 662 197 304 420 2,111 Amortisation charge for the year – 117 41 22 123 303 Impairment 14 1 – – 9 24 Disposals and write‑off – (2) (1) (2) (14) (19) Foreign exchange (27) (26) (5) (6) (22) (86) 31 December 2019 515 752 232 318 516 2,333

Net book values 31 December 2019 1,842 1,074 748 250 507 4,421 31 December 2018 1,919 1,230 808 278 452 4,687

Goodwill On 31 May 2019, the Group acquired Beyond Ratings, which resulted in additions to goodwill of £14 million (note 32).

The goodwill arising on consolidation represents the growth potential and assembled workforces of the Italian Group, LCH Group, FTSE Group, MillenniumIT, the US Information Services Group and Turquoise. The Company has no intangible assets (2018: none).

Impairment tests for goodwill Goodwill has been allocated for impairment testing purposes to 10 cash generating units (CGUs).

The recoverable amounts of these CGUs have been determined based on value in use calculations using discounted cash flow forecasts based on business plans prepared by management for a three year period ending 31 December 2022, and then projected for a further two years to 31 December 2024. Cash flows beyond this period are extrapolated using the estimated long‑term growth rates and applying the pre‑tax discount rates referred to below.

During the year an impairment has been recognised in relation to Turquoise Global Holdings Ltd due to uncertainties in the underlying future cash flows resulting in an impairment of £8 million in goodwill.

An impairment has been recognised in relation to Mergent due to lower forecast cash flows, driven by revenue performance below expectations set at the time of acquisition. This has resulted in an impairment of £6 million in goodwill.

London Stock Exchange Group plc 172 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

The amount of the net book value of goodwill allocated to each CGU is set out below:

Net book value of goodwill Pre‑tax discount rate used in value in use calculations 31 December Acquisition of Impairment in Foreign 31 December 2018 subsidiaries year exchange 2019 £m £m £m £m £m 2019 2018 Italian Group Capital Markets 405 – – (21) 384 11.6% 12.3% Technology Services 24 – – (1) 23 11.4% 10.5% Post Trade Services 443 – – (23) 420 13.0% 13.2%

MillenniumIT 1 – – – 1 19.3% 20.0%

Turquoise 9 – (8) – 1 8.8% 9.7%

FTSE Group 191 14 – (1) 204 10.5% 9.6%

LCH Group 128 – – (6) 122 9.9% 10.4%

US Information Services Group Frank Russell Group 429 – – (14) 415 10.4% 10.5% Yield Book 217 – – (8) 209 11.1% 10.5% Mergent 72 – (6) (3) 63 11.3% 10.0% 1,919 14 (14) (77) 1,842

Management has based its value in use calculations for each CGU on key assumptions about short‑ and medium‑term revenue and cost growth, long‑term economic growth rates (used to determine terminal values) and pre‑tax discount rates.

The values assigned to short‑ and medium‑term revenue and cost growth assumptions are based on the business plans prepared by management for a three year period ending 31 December 2022. The assumptions are derived from an assessment of current trends, anticipated market and regulatory developments, discussions with customers and suppliers, and management’s experience. These factors are considered in conjunction with the Group’s long‑term strategic objectives to determine appropriate short‑ and medium‑term growth assumptions.

Long‑term growth rates are assumed to be 1.8% for each of the Italian CGUs (2018: 1.9%), 8.6% for MillenniumIT (2018: 9.0%), 4.0% for each of the US Information Services CGUs (2018: 3.9%), 3.4% for the other CGUs (2018: 3.5%) and represent management’s internal forecasts based on external estimates of GDP and inflation analysis for the 10‑year period 1 January 2015 to 31 December 2024, and do not exceed the long‑term average growth rates for the countries in which the CGUs operate.

Pre‑tax discount rates are based on a number of factors including the risk‑free rates in Italy, France, Sri Lanka, USA and the UK as appropriate, the Group’s estimated market risk premium and a premium to reflect the inherent risks of each of the CGUs.

Value in use calculations for each CGU are sensitive to changes in short‑ and medium‑term revenue and cost growth assumptions, long term growth rates and pre‑tax discount rates.

Management believes the value in use of each CGU, with the exception of Mergent, is significantly higher than the carrying value, and is unlikely to be materially impaired by reasonable adverse changes to key assumptions. The excess of value in use over carrying value is determined by reference to the net book value as at 31 December 2019. Revenue and cost sensitivities assume a 5% change in revenues or costs for each of the 5 years in the value in use calculations.

The value in use of the Mergent CGU is equal to its carrying value. The impact of reasonable changes in the assumptions on Mergent’s value in use is set out below:

0.5% reduction 0.5% increase 5% reduction 5% increase in in long‑term in pre‑tax in revenues costs growth rate discount rate Cash generating unit £m £m £m £m Mergent (24) (19) (8) (8)

London Stock Exchange Group plc Annual Report 31 December 2019 173 Notes to the financial statements (continued)

Purchased intangible assets The fair values of the purchased intangible assets were principally valued using discounted cash flow methodologies and are being amortised over their useful economic lives, which do not normally exceed 25 years. The Group’s purchased intangible assets include:

Customer and supplier relationships These assets have been recognised on acquisition of major subsidiary companies by the Group. The amortisation periods remaining on these assets are between 7 to 23 years. Following a reassessment of useful economic lives the Group has recognised a £25 million acceleration of amortisation charge in the year.

Brands Brands have been recognised in a number of major acquisitions, including FTSE, LCH, Russell and Yield Book. Included within brands are trade names relating to the acquisition of Frank Russell Group of £538 million (2018: £583 million). The remaining amortisation period on these assets are between 3 to 23 years.

Software, licences and intellectual property These assets have been recognised on acquisition of subsidiary companies and have a remaining amortisation period of 2 to 18 years.

There are no other individual purchased intangible assets with a carrying value that is considered material to each asset class.

Following a review of purchased intangible assets no longer in use, the Group disposed of assets with costs of £2 million of customer relationships, £1 million of brands and £2 million of software licences, all with a nil net book value.

Impairment tests for purchased intangible assets Turquoise An impairment of £1 million has been recognised in relation to Customer and Supplier Relationships which represents the recurring source of income from customers’ existing at the time of acquisition. The impaired asset belongs to the Capital Markets reportable segment.

The recoverable amount has been determined based on a value in use calculation using cash flow projections from financial budgets and forecasts approved by senior management covering a three year period. The pre tax discount rate applied to cash flow projections is 8.8% (2018: 9.7%) and cash flows beyond the three‑year period are extrapolated using a 3.4% growth rate (2018: 3.5%). The projected cash flows have been impacted by weaker demand in the ‘lit’ trading book, coupled with increased costs of additional investment in information technology to support the business. This has resulted in the carrying value exceeding the value in use and the Group has recognised an impairment of £1 million in the current year taking the carrying value to nil.

Software and other As a part of the business operating model the Group develops technology solutions where software products are developed internally, for use within the Group or to sell externally. The cost of self‑developed software products in the year includes £100 million (2018: £133 million) representing assets not yet brought into use. No amortisation has been charged on these assets and instead they are tested for impairment annually.

During the year, additions relating to internally generated software amounted to £176 million (2018: £175 million). Research expenditure of £16 million (2018: £4 million) has been recognised in the income statement in the year.

Other amounts represent the internally built and developed trading systems within the various business lines, licences, capitalised contract costs and right‑of‑use assets. In general, these assets have a useful economic life of up to 7 years.

During the year, the Group capitalised £9 million (2018: £10 million) of incremental contract costs in respect of revenue generating contracts with customers and recognised a £7 million (2018: £6 million) amortisation charge relating to contract cost assets. No impairment was recognised in the year (2018: nil) in relation to contract cost assets.

Previously, the Group recognised licences held under finance leases with a carrying value of £6 million at 2018. On 1 January 2019, the Group adopted IFRS 16 (note 2) and these assets are now included with other right‑of‑use assets within ‘software and other’. During the year the Group recognised additions of £21 million of right‑of‑use assets, with a corresponding amortisation charge of £7 million.

Following a review of software assets in the year the Group recognised £9 million impairment in relation to assets no longer in use.

During the year the Group recognised disposals and write‑offs of assets no longer in use with a cost of £16 million, comprising £14 million nil net book value assets and £2 million of assets not yet brought into use.

London Stock Exchange Group plc 174 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

15. Investment in associates The Group has a number of associated companies that are accounted for using the equity method. The activities of these companies are complementary to the Group’s businesses. The associate companies are listed in note 36.

The investment in these companies is as follows:

Group Company £m £m 31 December 2017 5 3 Acquisitions and investments 28 12 Share of loss after tax (8) – Impairment – (8) 31 December 2018 25 7 Acquisitions and investments 11 11 Share of loss after tax (7) – Impairment – (6) Foreign exchange (1) – 31 December 2019 28 12

The total comprehensive income of the associates is equivalent to the loss after tax shown above. None of the associates are material to the Group.

During the year, the Group made additional investments in Curve Global for £11 million cash consideration, increasing the Group’s equity interest to 44.05%.

During the prior year, the Group acquired a 15.67% equity interest in AcadiaSoft, Inc., a provider of margin automation solutions, for US$22 million (£16 million) cash consideration and made additional investments in Curve Global of £12 million cash consideration, which maintained the Group’s equity interest at 43.38%.

16. Investment in subsidiary companies

Shares Other Total Company £m £m £m 31 December 2017 5,081 1,017 6,098 Investment in London Stock Exchange (C) Limited 382 – 382 Investment in London Stock Exchange Reg Holdings Limited 10 – 10 Investment in LSEGH US PT, Inc. 16 – 16 31 December 2018 5,489 1,017 6,506 Investment in London Stock Exchange (C) Limited 244 – 244 31 December 2019 5,733 1,017 6,750

Other includes amounts invested in subsidiary companies by way of capital contributions and awards granted under the Group’s share schemes.

% Country of incorporation and equity and Principal operating subsidiaries Principal activity principal operations votes held Held directly by the Company London Stock Exchange plc Recognised investment exchange England and Wales 100.00

Held indirectly by the Company Banque Centrale De Compensation SA (LCH SA) CCP clearing services France 73.45 Borsa Italiana S.p.A. Recognised investment exchange Italy 99.99 Cassa di Compensazione e Garanzia S.p.A. CCP clearing services Italy 99.99 Elite S.p.A. Business support programme Italy 74.99 Frank Russell Company Market indices provider USA 100.00 FTSE International Limited Market indices provider England and Wales 100.00 LCH Limited CCP clearing services England and Wales 82.61 Mergent, Inc. Business and financial information provider USA 100.00 Millennium IT Software (Private) Limited IT solutions provider Sri Lanka 100.00 Monte Titoli S.p.A. Pre‑settlement, settlement and centralised custody Italy 98.87 MTS S.p.A. Wholesale fixed income bonds Italy 62.53 The Yield Book, Inc. Fixed income indices and analytics USA 100.00 Turquoise Global Holdings Limited Multilateral trading facility England and Wales 51.36

Under Regulation 7 of The Partnerships (Accounts) Regulations 2008, the Group elected not to prepare partnership accounts for its indirect partnership interest in London Stock Exchange Connectivity Solutions LP, as its results are contained in the consolidated group accounts.

A full list of subsidiaries is provided in note 36.

London Stock Exchange Group plc Annual Report 31 December 2019 175 Notes to the financial statements (continued)

Material non‑controlling interests The LCH companies, LCH Ltd, based in the UK, and LCH SA, based in France, are the only subsidiaries that have material non‑controlling interests within the Group.

In 2018, the Group acquired further shares in the LCH Group and owned 82.61% of the equity throughout 2019.

Summarised financial information attributable to material non‑controlling interests Amounts include goodwill, purchased intangible assets and associated amortisation, impairments and deferred tax attributable to non‑controlling interests.

2019 2018 £m £m Profit for the year attributable to non‑controlling interests 49 63 Total comprehensive income for the year attributable to non‑controlling interests 38 65 Dividends paid to non‑controlling interests in the year (35) (37)

Summarised total financial information for companies with material non‑controlling interests Amounts include goodwill, purchased intangible assets and associated amortisation, impairments and deferred tax.

2019 2018 Summarised balance sheet £m £m Non‑current assets 570 548 Current assets 654,402 684,787 Current liabilities (653,684) (684,071) Non‑current liabilities (64) (41) Total equity 1,224 1,223

Attributable to: Equity holders of the company 965 967 Non‑controlling interests 259 256 1,224 1,223

2019 2018 Summarised total comprehensive income and cash flows £m £m Total income for the year 756 662 Total profit for the year 241 188 Total comprehensive income for the year 197 189 Net decrease in cash and cash equivalents (3) (87)

Subsidiaries exempt from audit The following UK subsidiaries will take advantage of the audit exemption set out within section 479A of the Companies Act 2006 for the year ended 31 December 2019. Company name Registration number London Stock Exchange Group Holdings Limited 6795362 London Stock Exchange Reg Holdings Limited 7378551 London Stock Exchange (C) Limited 7943990 London Stock Exchange Group (Services) Limited 9313935

London Stock Exchange Group plc 176 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

17. Deferred tax The movements in deferred tax assets and liabilities during the year are shown below.

Acquisition Provisions Accelerated deferred tax and other tax and temporary depreciation amortisation differences Total Group £m £m £m £m 31 December 2017 9 (484) 34 (441) Tax (charged)/credited to the income statement (2) 33 (15) 16 Tax credited/(charged) to other comprehensive income: – Defined benefit scheme remeasurement gain – – 5 5 ––Movement in debt instruments at FVOCI – – 4 4 – Foreign exchange – (19) – (19) Allowance on share options/awards – to equity – – 2 2 31 December 2018 7 (470) 30 (433) Impact of adoption of IFRS 16 (note 2) – – 4 4 31 December 2018 7 (470) 34 (429) Tax (charged)/credited to the income statement (2) 31 – 29 Tax (charged)/credited to other comprehensive income: – Movement in debt instruments at FVOCI – – (5) (5) ––Foreign exchange – 15 (3) 12 Allowance on share options/awards – to equity – – 10 10 31 December 2019 5 (424) 36 (383)

Assets at 31 December 2019 5 – 44 49 Liabilities at 31 December 2019 – (424) (8) (432) Net assets/(liabilities) at 31 December 2019 5 (424) 36 (383)

Assets at 31 December 2018 7 – 35 42 Liabilities at 31 December 2018 – (470) (5) (475) Net assets/(liabilities) at 31 December 2018 7 (470) 30 (433)

The deferred tax assets are recoverable against future taxable profits and are due after more than one year.

The net deferred tax asset of £36 million (2018: £30 million) in respect of provisions and other temporary differences relates to share based payments of £28 million (2018: £15 million), retirement benefits liability of £(19) million (2018: £(10) million), interest payable of £17 million (2018: £15 million), trading losses of £4 million (2018: £8 million), withholding tax on distributable reserves of subsidiary companies of £(6) million (2018: £(4) million), the impact of the adoption of new accounting standards of £4 million (2018: £3 million), accrued bonus of £2 million (2018: nil), Yield Book closing costs of £2 million (2018: nil), and other provisions and temporary differences of £4 million (2018: £3 million).

The purchased intangible assets of the acquired subsidiaries create a deferred tax liability due to the difference between their accounting and tax treatment. This liability is amortised at the same rate as the purchased intangible assets.

The Group has unrecognised deferred tax assets in respect of losses of £20 million (2018: £17 million) within certain Group subsidiaries. The assets will be recognised in the future only if suitable taxable income were to arise within the Group.

There was no deferred tax in the Company (2018: nil).

London Stock Exchange Group plc Annual Report 31 December 2019 177 Notes to the financial statements (continued)

18. Retirement benefit obligations The Group operates separate defined benefit and defined contribution schemes. The assets of the defined benefit and defined contribution schemes are held separately from those of the Group.

All schemes are governed by the local regulatory framework and employment laws in the country in which they operate.

The Company has no retirement benefit obligations.

Defined benefit schemes United Kingdom On 5 September 2016, the London Stock Exchange Retirement Plan (LSERP) and the LCH Pension Scheme in the UK (LCH UK) underwent a sectionalised merger into a new London Stock Exchange Group Pension Scheme (LSEGPS). The scheme maintains separate LCH and LSE Sections.

The LSEGPS is administered by trustees who are responsible for the scheme’s governance. The scheme invests in a wide range of assets in the UK and overseas through investment managers, appointed by the scheme’s trustees, who seek to balance risk and investment return. The assets are primarily managed by Ruffer LLP, Royal London Asset Management, Payden and Rygel Investment Management, Schroder Investment Management Limited and a ‘buy‑in’ insurance asset with Pension Insurance Corporation.

The plan assets do not include any of the Group’s own financial instruments, nor any property occupied by, or other assets used by, the Group.

The LSE section of LSEGPS was a non‑contributory defined benefit scheme that closed to new members in 1999. With effect from 31 March 2012, the LSERP also closed to accrual of future benefits for active members and it has been agreed that the benefits already accrued for affected members will remain linked to their salary with the Group.

The LCH section of LSEGPS was closed to new members from 30 September 2009. It was closed to further employee contributions and accrual of future benefits from 31 March 2013 with the defined contribution section remaining open until April 2017, when the Legal & General mastertrust was provided to all UK employees.

Pension scheme obligations and costs are determined by an independent qualified actuary on a regular basis using the projected unit credit method. The obligations are measured by discounting the best estimate of future cash flows to be paid out by the scheme and are reflected in the Group balance sheet.

Overseas LCH Group operates retirement indemnity and long‑service award schemes in Paris, for which the scheme obligations are calculated by an independent qualified actuary. They also operate an independent defined benefit scheme in Porto. Updated valuations of these funds are carried out by an independent qualified actuary.

The Trattamento di Fine Rapporto (TFR) operated by the Italian Group is a severance and leaving indemnity scheme, classified as an unfunded defined benefit scheme for funds accumulated prior to 1 July 2007. The service cost, representing deferred salaries accruing to employees, was included as an operating expense and was determined by law at 6.91% of salary payments subject to certain adjustments. The scheme obligation comprises accumulated service costs and is revalued by law at a rate equal to 75% of ‘national life price index +1.5%’ by an independent qualified actuary. Since 1 July 2007, the Group retains no obligation, as contributions are made directly into Italian state funds in the manner of a defined contribution scheme.

The employee benefit and retirement plan operated by MillenniumIT is classified as an unfunded defined benefit plan. The net obligation in respect of this plan is the amount of future benefit that employees have earned in return for their service in the current and prior periods. Once an employee is continuously employed for more than five years, he or she is entitled to a payment equivalent to half a month’s gross salary multiplied by the number of years in service at MillenniumIT.

Pension risks The principal risk to which the defined benefit schemes expose the Group arises from an increase in pension liabilities.

The pension liabilities could increase in the following circumstances: ––if increases in the plan liabilities are not accompanied by corresponding increases in the plan assets; ––if investment returns are lower than assumed in assessing the adequacy of plans; ––if inflation is higher than expected, increasing liabilities through indexing of pension payments; and ––the risk that members live longer than expected, increasing the length of time for which pensions have to be paid, potentially due to a medical breakthrough.

Such an increase in pension liabilities could lead to an increase in pension deficit. Defined benefit schemes are normally revalued by actuaries every three years. Where any material funding gap is identified by this process, the Trustees will agree a schedule of contributions with the sponsor company. Such contributions would result in financial impact to the Group.

In addition, with regard to the LSE Section of LSEGPS, the Group is exposed to the credit of the buy‑in insurance provider. A failure of the buy‑in insurance provider would reduce the pension assets and could thus also lead to a pension deficit or an increase in pension deficit and the need for contributions from the Group.

London Stock Exchange Group plc 178 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Defined contribution schemes In the UK, the only pension scheme open to employees is a defined contribution scheme, provided by Legal & General. Following a pension consultation, from April 2017, all UK employees are eligible to participate in the same pension scheme. A core contribution of 8% of basic salary is paid by the Group, who will also match employee contributions up to 4% of basic salary.

Defined contribution schemes are operated by FTSE International and US entities.

Amounts recognised in the income statement from continuing operations are as follows:

2019 2018 LSERP LCH UK Other plans Total LSERP LCH UK Other plans Total Notes £m £m £m £m £m £m £m £m Defined contribution schemes (4) (4) (11) (19) (4) (4) (10) (18) Defined benefit scheme – current/past service cost and expenses (1) – (6) (7) (1) – (6) (7) Total pension charge included in employee costs 7 (5) (4) (17) (26) (5) (4) (16) (25) Net finance income / (expense) 9 – 1 – 1 (1) 1 – – Total recognised in the income statement (5) (3) (17) (25) (6) (3) (16) (25)

Defined benefit assets/(obligations) for pension schemes

2019 2018 LSERP LCH UK Other plans Total LSERP LCH UK Other plans Total £m £m £m £m £m £m £m £m Fair value of assets Equities: ––Quoted 17 52 – 69 – 62 – 62 ––Not quoted 1 3 – 4 – 42 – 42 Bonds: ––Quoted 71 95 1 167 14 17 1 32 ––Not quoted 120 133 – 253 140 121 – 261 Property 5 – – 5 6 – – 6 Cash 1 4 – 5 15 2 – 17 Pensioner buy‑in policy 187 – – 187 180 – – 180 Total fair value of assets 402 287 1 690 355 244 1 600 Present value of funded obligations (395) (228) (18) (641) (361) (198) (17) (576) Surplus/(deficit) 7 59 (17) 49 (6) 46 (16) 24

As at 31 December 2019, the Group has recognised a net defined benefit asset of £7 million (2018: £(6) million) in relation to the LSE section and £59 million (2018: £46 million) in relation to the LCH section, on the basis that the Group has access to the surplus in the event of a wind‑up of the scheme and therefore no asset ceiling has been applied to the net surplus recognised. Further, no minimum funding commitments are associated with the plan.

UK pension plan actuarial assumptions are set out below:

2019 2018 LSERP LCH UK LSERP LCH UK Inflation rate – RPI 2.9% 2.9% 3.2% 3.2% Inflation rate – CPI 1.8% 1.8% 2.0% 2.0% Rate of increase in salaries 2.9% n/a 3.2% n/a Rate of increase in pensions in payment 3.5% 2.1% 3.6% 2.2% Discount rate: ––Non‑insured 2.1% 2.1% 3.0% 3.0% ––Insured 1.9% n/a 2.7% n/a Life expectancy from age 60 (years) –– Non‑retired male member 27.6 27.6 28.1 28.1 –– Non‑retired female member 30.1 30.0 30.6 30.5 –– Retired male member 26.7 27.0 27.2 27.5 –– Retired female member 28.9 28.8 29.4 29.2

The mortality assumptions are based on S2PA tables published by the Institute and Faculty of Actuaries adjusted to take account of projected future improvements in life expectancy from the Self Administered Pension Scheme (SAPS) mortality survey, which was published in 2008. We have used an allowance for CMI 2017 projections and applied a 1.25% for the male and female long-term trend rate in respect of future mortality improvements.

London Stock Exchange Group plc Annual Report 31 December 2019 179 Notes to the financial statements (continued)

Sensitivities The sensitivities regarding the principal assumptions used to measure the LSERP and LCH UK scheme obligations are:

2019 2018 Change in assumption Impact on scheme obligations Impact on scheme obligations Assumption LSERP LCH UK LSERP LCH UK Inflation rate (CPI) and salary increase Increase by 0.5% Increase by £3m Increase by £6m Increase by £3m Increase by £6m Rate of increase in pensions payment Increase by 0.5% Increase by £26m Increase by £17m Increase by £21m Increase by £11m Discount rate Increase by 0.5% Reduce by £30m Reduce by £24m Reduce by £24m Reduce by £19m Mortality rate Increase by 1 year Increase by £18m Increase by £8m Increase by £14m Increase by £6m

The sensitivity analysis above has been determined based on a method that extrapolates the impact on defined benefit obligations as a result of reasonable changes in key assumptions occurring at the end of the reporting period.

The impact of the salary increase assumption as a standalone sensitivity has an immaterial impact on the scheme obligations.

Changes in the present value of the defined benefit obligations during the year

2019 2018 LSERP LCH UK Other plans Total LSERP LCH UK Other plans Total £m £m £m £m £m £m £m £m Benefit obligation as at beginning of year 361 198 17 576 376 208 17 601 Pension expense: ––Past/current service cost – – 6 6 1 – 6 7 ––Interest cost 10 6 – 16 10 6 – 16 Subtotal included in the income statement 10 6 6 22 11 6 6 23 Remeasurement losses/(gains): ––Actuarial losses/(gains) – financial assumptions 44 32 1 77 (10) (8) (1) (19) ––Actuarial losses – demographic assumptions (3) (3) – (6) (3) – – (3) ––Actuarial (gains)/losses – experience (1) – – (1) 3 1 – 4 Subtotal included in total comprehensive income 40 29 1 70 (10) (7) (1) (18) Benefits paid (16) (6) (6) (28) (16) (9) (5) (30) Foreign exchange – 1 – 1 – – – – Benefit obligation as at end of year 395 228 18 641 361 198 17 576

Movement in fair value of scheme assets during the year

2019 2018 LSERP LCH UK Other plans Total LSERP LCH UK Other plans Total £m £m £m £m £m £m £m £m Fair value of scheme assets as at beginning of year 355 244 1 600 356 264 1 621 Pension income: Interest income 10 7 – 17 9 7 – 16 Subtotal included in the income statement 10 7 – 17 9 7 – 16 Remeasurement gains/(losses): Return/(loss) on plan assets, excluding interest income 39 38 – 77 (9) (21) – (30) Subtotal included in total comprehensive income 39 38 – 77 (9) (21) – (30) Contributions by employer 15 3 – 18 15 3 – 18 Expenses (1) – – (1) – – – – Benefits paid (16) (6) – (22) (16) (9) – (25) Foreign exchange – 1 – 1 – – – – Fair value of scheme assets as at end of year 402 287 1 690 355 244 1 600

The actual gain on plan assets was £94 million (2018: loss £14 million).

London Stock Exchange Group plc 180 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Defined benefit actuarial gains and losses recognised The experience adjustments and the effects of changes in actuarial assumptions of the pension scheme during the year are recognised in the statement of comprehensive income.

2019 2018 LSERP LCH UK Other plans LSERP LCH UK Other plans £m £m £m £m £m £m Recognised up to beginning year (28) 30 2 (29) 44 1 Net actuarial (losses)/gains recognised in the year (1) 9 (1) 1 (14) 1 Cumulative amount recognised at end of year (29) 39 1 (28) 30 2

The last actuarial valuations of the UK defined benefit scheme were carried out as at 31 December 2017 by an independent qualified actuary. According to the schedule of contributions of these valuations, LSE plc has funded its defined benefit scheme deficit £14 million in 2018 and 2019 and is expected to pay £14 million per annum into the LSE Section in years 2020 to 2022. LCH Limited funded its defined benefit scheme deficit £3 million in 2019 and is expected to pay £3 million per annum into the LCH Section in years 2020 to 2022.

The weighted average duration of the LSERP defined benefit obligation at the end of the reporting period is estimated to be 21 years and 12 years for non‑insured and insured, respectively. The weighted average duration of the LCH UK defined benefit obligation at the end of the reporting period is estimated to be 23 years.

The Trustees invests the Scheme’s assets in a portfolio of physical assets and liability matching assets. The physical assets have the objective of outperforming the liabilities by investing in a suitably diversified range of assets, consisting of risk premia strategies, corporate bonds and other credit alternatives and property which together are expected to reduce investment volatility.

The liability matching assets have the objective of using a liability driven investment strategy to hedge against the interest rate and inflation risks associated with liabilities predominantly in a range of gilts, both nominal and index linked. The LSERP scheme also includes a bulk annuity transaction insuring the benefits for a part of the scheme’s pensioner liabilities.

This combination of physical assets and liability matching assets is expected to provide an appropriate risk and return profile, with suitable interest rate and inflation hedging characteristics, consistent with lower volatility and improved funding level.

London Stock Exchange Group plc Annual Report 31 December 2019 181 Notes to the financial statements (continued)

19. Financial assets and financial liabilities Financial instruments by category The financial instruments of the Group and Company are categorised as follows: Financial assets 31 December 2019 Group Company Financial Financial Financial Financial assets at fair assets at fair Financial assets at fair assets at value through value through assets at value through amortised cost OCI profit or loss Total amortised cost profit or loss Total £m £m £m £m £m £m £m Clearing member financial assets: ––Clearing member trading assets 122,299 – 574,889 697,188 – – – ––Other receivables from clearing members 8,330 – – 8,330 – – – ––Other financial assets – 23,576 – 23,576 – – – ––Clearing member cash and cash equivalents 67,118 – – 67,118 – – – Clearing member business assets 197,747 23,576 574,889 796,212 – – – Trade and other receivables 521 – 5 526 706 – 706 Cash and cash equivalents 1,493 – – 1,493 2 – 2 Investments in financial assets – debt instruments – 106 – 106 – – – Investments in financial assets – equity instruments – 241 – 241 – – – Derivative financial instruments – – 2 2 – 2 2 Total 199,761 23,923 574,896 798,580 708 2 710

There were no transfers between categories during the year. Prepayments and contract assets within trade and other receivables are not classified as financial instruments. The Group no longer recognises bonds with less than three months maturity as cash and cash equivalents. They remain within investments in financial assets – debt. Financial liabilities 31 December 2019 Group Company Financial Financial liabilities at liabilities at Financial fair value Financial fair value liabilities at through profit liabilities at through profit amortised cost or loss Total amortised cost or loss Total £m £m £m £m £m £m Clearing member financial assets: ––Clearing member trading liabilities 122,299 574,889 697,188 – – – ––Other payables to clearing members 98,914 – 98,914 – – – Clearing member business liabilities 221,213 574,889 796,102 – – – Trade and other payables 747 – 747 712 – 712 Borrowings 2,085 – 2,085 2,077 2,077 Derivative financial instruments – 40 40 – 40 40 Total 224,045 574,929 798,974 2,789 40 2,829

There were no transfers between categories during the year. Social security and other tax liabilities within trade and other payables, and contract liabilities are not classified as financial instruments. The financial instruments of the Group and Company at the previous year’s balance sheet date were as follows: Financial assets 31 December 2018 Group Company Financial Financial Financial Financial assets at fair assets at fair Financial assets at fair assets at value through value through assets at value through amortised cost OCI profit or loss Total amortised cost profit or loss Total £m £m £m £m £m £m £m Clearing member financial assets: ––Clearing member trading assets 138,153 – 604,303 742,456 – – – ––Other receivables from clearing members 2,261 – – 2,261 – – – ––Other financial assets – 19,694 – 19,694 – – – ––Clearing member cash and cash equivalents 70,927 – – 70,927 – – – Clearing member business assets 211,341 19,694 604,303 835,338 – – – Trade and other receivables 761 – – 761 622 – 622 Cash and cash equivalents 1,510 – – 1,510 6 – 6 Investments in financial assets – debt instruments – 84 – 84 – – – Total 213,612 19,778 604,303 837,693 628 – 628

Prepayments and contract assets within trade and other receivables are not classified as financial instruments. Contract assets that have been reclassified as fees receivable are included within trade and other receivables (note 21).

London Stock Exchange Group plc 182 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Financial liabilities 31 December 2018 Group Company Financial Financial liabilities at liabilities at Financial fair value Financial fair value liabilities at through profit liabilities at through profit amortised cost or loss Total amortised cost or loss Total £m £m £m £m £m £m Clearing member financial liabilities: ––Clearing member trading liabilities 138,153 604,303 742,456 – – – ––Other payables to clearing members 93,052 – 93,052 – – – Clearing member business liabilities 231,205 604,303 835,508 – – – Trade and other payables 510 10 520 402 – 402 Borrowings 2,203 – 2,203 2,186 – 2,186 Derivative financial instruments – 47 47 – 47 47 Total 233,918 604,360 838,278 2,588 47 2,635

Social security and other tax liabilities within trade and other payables are not classified as financial instruments.

The following table provides the fair value measurement hierarchy of the Group’s financial assets and liabilities as at 31 December 2019:

Financial assets measured at fair value 31 December 2019 Group Quoted prices Significant Significant in active observable unobservable markets inputs inputs Total (Level 1) (Level 2) (Level 3) fair value £m £m £m £m Clearing member trading assets: ––Derivative instruments 11,492 3,061 – 14,553 ––Non‑derivative instruments 3 560,333 – 560,336 ––Other financial assets 23,576 – – 23,576 Fair value of clearing member business assets 35,071 563,394 – 598,465 Investments in financial assets – debt 106 – – 106 Investment in financial assets – equity – – 241 241 Trade and other receivables – convertible loan notes – – 5 5 Derivatives not designated as hedges: ––Foreign exchange forward contracts – 2 – 2 35,177 563,396 246 598,819

The Company had derivative assets of £2 million (2018: nil). All derivatives assets in the Company are the same as for the Group.

Financial liabilities measured at fair value 31 December 2019 Group Quoted prices Significant Significant in active observable unobservable markets inputs inputs Total (Level 1) (Level 2) (Level 3) fair value £m £m £m £m Clearing member trading liabilities: Derivative instruments 11,492 3,061 – 14,553 Non‑derivative instruments 3 560,333 – 560,336 Fair value of clearing member business liabilities 11,495 563,394 – 574,889 Derivatives used for hedging: ––Cross‑currency interest rate swaps – 39 – 39 Derivatives not designated as hedges: ––Foreign exchange forward contracts – 1 – 1 11,495 563,434 – 574,929

The Company had derivative liabilities of £40 million (2018: £47 million). All derivative liabilities in the Company are the same as for the Group.

London Stock Exchange Group plc Annual Report 31 December 2019 183 Notes to the financial statements (continued)

The following table provides the fair value measurement hierarchy of the Group’s financial assets and liabilities as at 31 December 2018: Financial assets measured at fair value 31 December 2018 Group Quoted prices Significant Significant in active observable unobservable markets inputs inputs Total (Level 1) (Level 2) (Level 3) fair value £m £m £m £m Clearing member trading assets: ––Derivative instruments 4,958 8 – 4,966 ––Non‑derivative instruments 5 599,332 599,337 ––Other financial assets 19,694 – – 19,694 Fair value of clearing member business assets 24,657 599,340 – 623,997 Investment in financial assets – debt 84 – – 84 24,741 599,340 – 624,081

Financial liabilities measured at fair value 31 December 2018 Group Quoted prices Significant Significant in active observable unobservable markets inputs inputs Total (Level 1) (Level 2) (Level 3) fair value £m £m £m £m Clearing member trading liabilities: ––Derivative instruments 4,958 8 – 4,966 ––Non‑derivative instruments 5 599,332 – 599,337 Fair value of clearing member business liabilities 4,963 599,340 – 604,303 Deferred consideration – – 10 10 Derivatives designated as hedges: ––Cross-currency interest rate swaps – 47 – 47 4,963 599,387 10 604,360

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

––Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; ––Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and ––Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

For assets and liabilities classified as Level 1, the fair value is based on market price quotations at the reporting date.

For assets and liabilities classified as Level 2, the fair value is calculated using one or more valuation techniques (e.g. the market approach or the income approach) with market observable inputs. The selection of the appropriate valuation techniques may be affected by the availability of the relevant inputs as well as the reliability of the inputs. The inputs may include currency rates, interest rate and forward rate curves and net asset values.

There have been no transfers between Level 1 and Level 2 during the current and prior period.

When observable market data is not available, the Group uses one or more valuation techniques (e.g. the market approach or the income approach) for which sufficient and reliable data is available. These inputs used in estimating the fair value of Level 3 financial instruments include expected timing and level of future cash flows, timing of settlement, discount rates and net asset values of certain investments.

There are no deferred consideration liabilities outstanding in relation to put options over non‑controlling interests of subsidiaries as at 31 December 2019 (2018: £10 million). The deferred consideration was paid during the year.

With the exception of Group borrowings, management has assessed that the fair value of financial assets and financial liabilities categorised as being at amortised cost approximate to their carrying values. The fair value of the Group’s borrowings is disclosed in note 26.

The Group’s financial assets and financial liabilities held at fair value consist largely of securities restricted in use for the operations of the Group’s CCPs as managers of their respective clearing and guarantee systems. The nature and composition of the CCP clearing business assets and liabilities are explained in the accounting policies section in note 1.

As at 31 December 2019, there are no provisions for expected credit losses in relation to any of the CCP businesses’ financial assets held at amortised cost or FVOCI (2018: nil). The Group closely monitors its CCP investment portfolio and invests only in government debt and other collateralised instruments where the risk of loss is minimal. There was no increase in credit risk in the year and none of the assets are past due (2018: nil).

London Stock Exchange Group plc 184 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Investments in financial assets – equity On 30 January 2019, the Group acquired a 4.92% equity interest in Euroclear Holding SA/NV (Euroclear) for €278 million (£244 million) and considers its interest a long‑term strategic investment. As at 31 December 2019, the carrying value of the investment is £238 million (€278 million). The investment is classified as Level 3, but was classified as Level 2 on acquisition. The fair value can be derived from external observable inputs, which include transactions in equity. No such transactions have occurred since the acquisition of the Group’s interest. The Group regularly reviews Euroclear’s financial information, which is available publicly or received as a shareholder and considers the current value to be a reasonable approximation of fair value. A dividend of £7 million was received during the year and recognised directly in the income statement within operating profit.

On 25 February 2019, the Group acquired a 7.3% equity interest in Nivaura Limited (Nivaura) for £3 million. A further investment of £4 million in the form of a convertible loan was also made. The loan is convertible to equity under certain conditions and attracts a discount on the available share price. The fair value of the loan as at 31 December 2019 is £5 million and is calculated using expected values based on the probability of each possible outcome. A fair value gain of £1 million has been recognised during the year in the income statement. Interest is charged on the loan at 6% per annum for the first two years and 15% for any years thereafter. Finance income has been recognised in the year, but is immaterial.

The fair value of the Nivaura investment is classified as Level 3. The fair value can be derived from external observable inputs, which include transactions in equity. No such transactions have occurred since the acquisition of the Group’s interest. The Group regularly reviews financial information for Nivaura and considers the current value as a reasonable approximation of its fair value.

The Group has opted to value the equity investments at FVOCI, given the long‑term strategic nature of these interests. The convertible loan is held at fair value through profit or loss, as it contains a derivative option.

Hedging activities and derivatives Net investment hedges Cross‑currency interest rate swaps In 2017, the Group issued €1 billion of bonds in two €500 million tranches that mature in 2024 and 2029. €700 million of these bonds were swapped on a coordinated basis into US$836 million through a series of cross‑currency interest rate swaps which mature on the same dates as the bonds. These instruments effectively exchange some of the obligations and coupons of the bonds from Euros into US dollars in order to more closely match the Group’s currency of borrowing to the currency of its net assets and earnings. These swaps have been designated as a hedge of the Group’s net investments in its US dollar reporting subsidiaries and qualify for effective hedge accounting.

€700 million cross‑currency interest rate swap 2019 2018 Fair value of derivative on the balance sheet £(39)m £(17)m Nominal value of hedging instrument $836m $836m Hedge ratio 1:1 1:1 Hedge effectiveness 100% 100% Change in fair value of derivative £(22)m £(21)m Change in value of net investment £22m £21m Cumulative amount held in hedging reserve £(39)m £(17)m

The 2009 £250 million bond was swapped from Sterling into Euros. This also resulted in a reduction in balance sheet translation exposure on Euro denominated net assets and the protection of Sterling cash flows. These swaps were designated as a hedge of the Group’s net investment in the Italian Group and qualified for effective hedge accounting until their maturity in October 2019.

£242 million cross‑currency interest rate swap 2019 2018 Fair value of derivative on the balance sheet – £(30)m Nominal value of hedging instrument – €300m Hedge ratio – 1:1 Hedge effectiveness – 100% Change in fair value of derivative £12m £(1)m Change in value of net investment £(12)m £1m Cumulative amount held in hedging reserve £(18)m £(30)m

The £18 million loss remains in the hedging reserve as the Group continues to own the underlying investment.

London Stock Exchange Group plc Annual Report 31 December 2019 185 Notes to the financial statements (continued)

Non‑derivative hedges €800 million of the €1,500 million bonds not swapped into US dollars qualify as hedges of the Group’s net investments in Euro denominated subsidiaries and qualify for effective hedge accounting. The movement on the €700 million that has been swapped is included below and is netted against the fair value movement of the US dollar derivative in the hedging reserve.

Euro denominated bonds 2019 2018 Carrying value of debt on the balance sheet £1,274m £1,342m Nominal value of hedging instrument €1,500m €1,500m Hedge ratio 1:1 1:1 Hedge effectiveness 100% 100% Change in carrying value of hedging instrument £71m £(17)m Change in value of net investment £(71)m £17m Cumulative amount held in hedging reserve £50m £(21)m

Throughout the financial year the Group drew on its committed bank facilities in Euro and US dollars and issued Euro denominated Commercial Paper. These drawings and issuances were designated as hedges of the Group’s net investments in Euro and US dollar denominated subsidiaries.

Revolving credit facility and commercial paper 2019 2018 Carrying value of debt on balance sheet £378m £270m Nominal value of hedging instrument – Euros €317m €300m Nominal value of hedging instrument – US dollars US$141m nil Hedge ratio 1:1 1:1 Hedge effectiveness 100% 100% Change in carrying value of hedging instruments £10m £(16)m Change in value of net investments £(10)m £16m Cumulative amount held in reserve £1m £(6)m

2019 2018 Hedging reserve £m £m 1 January (117) (62) Changes in fair value recognised in other comprehensive income 71 (55) 31 December (46) (117)

No amounts have been reclassified to the income statement during the year (2018: £nil). £40 million of losses remain in reserves as at 31 December 2019 that have not been recycled to the income statement, as the Group continues to hold the underlying investments (2018: £43 million losses).

The Group’s hedging instruments are recognised on the balance sheet within derivative financial instruments or borrowings.

Foreign currency forwards At 31 December 2019, payables of €261 million and US$239 million were hedged forward into the next financial year. The fair value of the derivatives at the year end was an asset of £2 million (2018: nil) and a liability of £1 million (2018: nil).

Hedge accounting is not applied to these derivatives.

London Stock Exchange Group plc 186 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

20. Offsetting financial assets and financial liabilities The Group reports financial assets and financial liabilities on a net basis on the balance sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liabilities simultaneously. The following table shows the impact of netting arrangements on all financial assets and financial liabilities that are reported net on the balance sheet as at 31 December 2019:

Gross Amount Net amount as amounts offset reported 31 December 2019 £m £m £m Other financial assets 1,087,976 (1,073,415) 14,561 Repurchase agreements 792,921 (110,294) 682,627 Total assets 1,880,897 (1,183,709) 697,188 Other financial liabilities (1,118,402) 1,103,841 (14,561) Reverse repurchase agreements (792,921) 110,294 (682,627) Total liabilities (1,911,323) 1,214,135 (697,188)

The impact of netting arrangements on all financial assets and financial liabilities that are reported net on the balance sheet as at 31 December 2018 is as follows:

Gross Amount Net amount as amounts offset reported 31 December 2018 £m £m £m Other financial assets 867,201 (859,535) 7,666 Repurchase agreements 823,180 (88,390) 734,790 Total assets 1,690,381 (947,925) 742,456 Other financial liabilities (892,461) 884,795 (7,666) Reverse repurchase agreements (823,180) 88,390 (734,790) Total liabilities (1,715,641) 973,185 (742,456)

All offset amounts are held in Clearing member trading assets and Clearing member trading liabilities within the Group’s financial instruments.

As CCPs, the Group’s operating companies sit in the middle of members’ transactions and hold default funds and margin amounts as a contingency against the default of a member. As such, further amounts are available to offset in the event of a default reducing the asset and liability of £697,188 million (2018: £742,456 million) to nil.

London Stock Exchange Group plc Annual Report 31 December 2019 187 Notes to the financial statements (continued)

21. Trade and other receivables

Group Company 2019 2018 2019 2018 Notes £m £m £m £m Non‑current Deferred consideration – 28 – – Fees receivable1 1 1 – – Amounts due from Group companies 34 – – 41 25 Amounts due from associates 34 1 – – – Net investments in leases 24 3 – – – Convertible loan notes 19 5 – – – Other receivables 9 2 – – Contract assets – 2 – – 19 33 41 25 Current Trade receivables 328 432 – – Fees receivable1 141 139 – – Less: provision for expected credit losses on trade receivables (9) (11) – – Trade receivables – net 460 560 – – Amounts due from Group companies 34 – – 513 525 Amounts due from associates 34 2 1 – – Group relief receivable – – 101 68 Deferred consideration 27 28 – – Other receivables 18 141 51 4 Prepayments 58 53 3 3 Contract assets 1 2 – – 566 785 668 600 Total 585 818 709 625 1. The 31 December 2018 comparatives have been re‑presented for the change in classification of the majority of contract assets as fees receivable.

The carrying amount of the Group’s current trade and other receivables are denominated in the following currencies:

2019 2018 £m £m Sterling 208 361 Euro 116 117 US Dollar 227 288 Other currencies 15 19 566 785

Movements in the Group’s provision for expected credit losses on trade receivables are as follows:

2019 2018 £m £m 1 January 11 11 Provision for impairment of receivables – 2 Receivables written off during the year as uncollectible – (1) Provisions no longer required (2) – Amounts recovered in the year – (1) 31 December 9 11

The creation and release of the provisions for impaired receivables have been included in operating expenses in the income statement. Amounts charged to the allowance account are written off when there is no expectation of recovering additional cash.

The other classes within trade and other receivables and the other categories of financial assets do not contain impaired assets.

Fees receivable and contract assets In 2018, the Group considered contract assets as amounts primarily related to the right to consideration for work completed but not invoiced at the reporting date. These amounts are not conditional on something other than the passage of time, and therefore these amounts are now included within trade and other receivables as fees receivable.

Where assets exist that are conditional on something other than the passage of time, these continue to be recognised as contract assets and are also included in trade and other receivables.

There is no change in the total of assets recognised.

During the year, the Group recognised no impairment losses in relation to contract assets.

London Stock Exchange Group plc 188 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Movements in the Group’s contract assets during the year were as follows:

2019 2018 £m £m 1 January 4 – Amounts billed in the year (4) – Services provided in the year 1 4 31 December 1 4

The contract assets table has been re-presented to reflect the fact that there has been a change in recognition of assets as fees receivable as follows:

As at 31 December 1 January 2018 Reclassification 2019 £m £m £m Contract assets 144 (140) 4 Fees receivable – 140 140 144 – 144

22. Cash and cash equivalents

Group Company 2019 2018 2019 2018 £m £m £m £m Cash at bank 607 701 – 1 Short-term deposits 886 809 2 5 1,493 1,510 2 6

Cash and cash equivalents are held with authorised counterparties of a high credit standing; in secured investments by LCH Group companies and CC&G, and unsecured interest bearing current and call accounts, short-term deposits and AAA-rated money market funds elsewhere in the Group. Management does not expect any losses from non-performance by counterparties holding cash and cash equivalents, and there are no material differences between book and fair values. Cash and cash equivalents do not include amounts held by the CCPs on behalf of their clearing members.

At 31 December 2019, cash and cash equivalents shown above include £1,125 million (2018: £1,120 million) of amounts held by regulated entities for regulatory and operational purposes. Total amounts set aside for regulatory and operational purposes include current investments in financial assets of £81 million (2018: £53 million) and non-current investments in financial assets of £25 million (2018: £31 million).

All amounts are subject to regular reviews with regulators in the UK, France and Italy.

23. Trade and other payables

Group Company 2019 2018 2019 2018 Notes £m £m £m £m Non‑current Other non-current payables 4 10 – – Lease liabilities 24 146 1 – – 150 11 – –

Current Trade payables 57 52 1 1 Amounts owed to Group companies 34 – – 663 366 Amounts owed to associates 34 1 – – – Social security and other taxes 23 29 – – Other payables 164 98 19 22 Lease liabilities 24 37 4 – – Accruals 338 355 29 13 620 538 712 402 Total 770 549 712 402

Prior to the adoption of IFRS 16, at 31 December 2018 lease liabilities totalling £5 million were reported within other payables. There is no change to total trade and other payables.

Other payables includes margin payable on reverse repurchase contracts within the CCP businesses.

London Stock Exchange Group plc Annual Report 31 December 2019 189 Notes to the financial statements (continued)

24. Leases Movements in the lease liabilities during the year were as follows:

2019 £m 31 December 2018 5 Impact of adoption of IFRS 16 (note 2) 201 1 January 2019 (restated) 206 Acquisition of subsidiary (note 32) 1 Leases terminated early (1) New lease contracts 20 Lease interest expense (note 9) 4 Lease payments (45) Foreign exchange (2) 31 December 2019 183

Movements in lease liabilities are a new disclosure requirement as a result of the adoption of IFRS 16 on 1 January 2019. The Group has used the modified retrospective approach to transition to IFRS 16 and therefore no comparative disclosures are presented.

The Group is both a lessee and lessor of assets.

Group as lessee Right-of-use assets are disclosed within property, plant and equipment (note 13) and intangible assets (note 14).

A number of leases, which although originally for longer than 12 months at inception, ended within 12 months of the date of adoption: these leases have been treated as short-term leases under IFRS 16 and the expense incurred in the year is shown within expenses by nature (note 6).

The Group has applied discount rates specific to the country and entity for all leases of property and other assets. The maturity of the Group’s lease commitments is disclosed within the risk management note (note 3). Lease liabilities are included within trade and other payables (note 23).

The weighted average incremental borrowing rate used by the Group for the calculation of the lease liabilities recognised on adoption was 2.4%.

Variable lease payments are linked to a publicly available index and adjustments to the value of assets are made accordingly. There are no outstanding options to extend lease periods or early break clauses that have not been accounted for that would create material additional liabilities.

The total amount paid during the year for all leased assets was £49 million.

Group as lessor The Group sub-lets a number of its property right-of-use assets where there is surplus space, or the office is no longer used by the business. The right-of-use asset is derecognised, and a net investment in lease equal to the present value of future rental income is recognised instead. Any difference in value is recognised as a profit or loss on disposal in the income statement. A loss on disposal of £2 million relating to property right-of-use assets was recognised in the year.

The value of net investment in leases is disclosed within trade and other receivables (note 21). Finance income earned on the sub-leases is included within finance income (note 9), but is immaterial.

The Group carries out stringent checks on potential lessees before granting a lease to ensure the Group’s asset (the building) is protected. In addition, certain “make good” clauses are included in any lease, with penalties for non-completion. A security deposit is also retained to cover any additional costs incurred.

The value of future payments receivable is as follows:

More than Less than 1 1 year, less More than 5 year than 5 years years Total £m £m £m £m Rent amounts due 1 2 – 3

London Stock Exchange Group plc 190 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

25. Contract liabilities

2019 2018 Group £m £m Non-current 88 118 Current 157 153 Total 245 271

There were no contract liabilities in the Company (2018: nil).

Contract liabilities primarily relate to the consideration received from customers for which services have not yet been rendered.

Changes in the Group’s contract liabilities balances during the year were as follows:

2019 2018 £m £m 1 January 271 244 Revenue recognised as a result of revised recognition period (32) – Revenue recognised in the income statement (154) (134) Increases due to consideration received (excluding amounts recognised as revenue during the year) 162 160 Foreign exchange (2) 1 31 December 245 271

During the year, the Group revised the recognition period within the Capital Markets segment. This resulted in £32 million being released from contract liabilities and recognised as revenue.

The Group’s contract liabilities are expected to be recognised in the following periods after 31 December 2019:

Post Trade Post Trade Services – Information Services – CC&G and Capital Technology Services LCH Monte Titoli Markets Services Group £m £m £m £m £m £m Less than 1 year 112 2 – 41 2 157 More than 1 year but less than 5 years – – – 75 – 75 More than 5 years – – – 13 – 13 Contract liabilities as at end of year 112 2 – 129 2 245

26. Borrowings

Group Company 2019 2018 2019 2018 £m £m £m £m Current Bank borrowings 256 41 248 24 Commercial paper 256 270 256 270 Bonds – 250 – 250 512 561 504 544 Non‑current Bonds 1,573 1,642 1,573 1,642 1,573 1,642 1,573 1,642 Total 2,085 2,203 2,077 2,186

London Stock Exchange Group plc Annual Report 31 December 2019 191 Notes to the financial statements (continued)

The Group has the following committed bank facilities and unsecured notes:

Carrying value Interest rate at 31 percentage at December 31 December Notes/Facility 2019 2019 Type Expiry Date £m £m % Drawn value of Facilities Dual-currency bridge credit facility Jan 20221 10,167 (8) LIBOR + 0.3 Multi-currency revolving credit facility Nov 2022 600 115 LIBOR + 0.45 Multi-currency revolving credit facility Dec 2024 600 149 LIBOR + 0.3 Total committed bank facilities 256

Commercial paper Jan 2020 256 256 (0.330)2

£300 million bond, issued November 2012 Nov 2021 300 299 4.750 €500 million bond, issued September 2017 Sep 2024 427 426 0.875 €500 million bond, issued December 2018 Dec 2027 427 424 1.750 €500 million bond, issued September 2017 Sep 2029 427 424 1.750 Total bonds 1,573 Total committed facilities and unsecured notes 2,085 1. Terminates 12 months after the earlier of Refinitiv business acquisition or the end of January 2022. 2. The Commercial paper interest rate reflected is the average interest rate achieved on the outstanding issuances. Current borrowings The Group retained total committed revolving credit bank facilities of £1,200 million during the financial year. The final one year extension option on the five year £600 million facility arranged in December 2017 was taken up to push the final maturity out to December 2024. In August 2019 the Group arranged a Bridge Facility comprising tranches of US$9.325 billion and €3.58 billion. The revolving credit facilities were partially drawn at 31 December 2019 and the Bridge Facility remained undrawn, with total facilities carrying value of £256 million (2018: £41 million) which includes £10 million of deferred arrangement fees (2018: £2 million). Further details of the Bridge Facility arrangement fees amortised to the income statements are provided in note 8.

The Group maintained its £1 billion Euro Commercial Paper Programme. Outstanding issuances at 31 December 2019 of €300 million (£256 million) (2018: of €300 million (£270 million)) may be reissued upon maturity in line with the Group’s liquidity requirements.

In October 2019, the Company redeemed the 2009 £250 million unsecured bond using funding drawn from its bank credit facilities. The issue price of the bond was £99.548 per £100 nominal. The coupon on the bond was dependent on the Company’s credit ratings with Moody’s and Standard & Poor’s, which were unchanged at A3 and A- respectively. The bond coupon remained at 9.125% per annum for the period outstanding.

Cassa di Compensazione e Garanzia S.p.A. (CC&G) has direct intra-day access to refinancing with the Bank of Italy to cover its operational liquidity requirements in the event of a market stress or participant failure. In addition, it has arranged commercial bank back-up credit lines with a number of commercial banks, which total €420 million at 31 December 2019 (2018: €420 million), for overnight and longer durations to broaden its liquidity resources consistent with requirements under the European Markets Infrastructure Regulation (EMIR).

LCH SA has a French banking licence and is able to access refinancing at the European Central Bank to support its liquidity position. LCH Limited is deemed to have sufficient fungible liquid assets to maintain an appropriate liquidity position, and has direct access to certain central bank facilities to support its liquidity risk management in accordance with the requirements under the EMIR. In accordance with the Committee on Payments and Market Infrastructures (CPMI), International Organization of Securities Commissions (IOSCO) and Principles for Financial Market Infrastructures (PFMIs), many Central Banks now provide for CCPs to apply for access to certain Central Bank facilities.

In addition, a number of Group entities have access to uncommitted operational, money market and overdraft facilities which support post trade activities and day-to-day liquidity requirements across its operations.

Non-current borrowings In November 2012, the Company issued a £300 million bond under its Euro Medium Term Notes Programme (launched at the same time) which is unsecured and is due for repayment in November 2021. Interest is paid semi-annually in arrears in May and November each year. The issue price of the bond was £100 per £100 nominal. The coupon on the bond is fixed at 4.75% per annum.

In September 2017, the Company issued €1 billion of bonds in two €500 million (£427 million) tranches under its updated Euro Medium Term Notes Programme. The bonds are unsecured and the tranches are due for repayment in September 2024 and September 2029 respectively. Interest is paid annually in arrears in September each year. The issue prices of the bonds were €99.602 per €100 nominal for the 2024 tranche and €99.507 per €100 nominal for the 2029 tranche. The coupon on the respective tranches is fixed at 0.875% per annum and 1.75% per annum respectively.

In December 2018, the Company issued a €500 million (£427 million) bond under its updated Euro Medium Term Notes Programme. The bond is unsecured and due for repayment in December 2027. Interest is paid annually in arrears in December each year. The issue price was €99.547 per €100 nominal. The coupon on the bond is fixed at 1.75% per annum.

London Stock Exchange Group plc 192 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Fair values The fair values of the Group’s borrowings are as follows:

2019 2018 Carrying value Fair value Carrying value Fair value Group £m £m £m £m Borrowings –– within 1 year 512 512 561 561 –– after more than 1 year 1,573 1,676 1,642 1,914 2,085 2,188 2,203 2,475

The fair values of the Company’s borrowings are as follows:

2019 2018 Carrying value Fair value Carrying value Fair value Company £m £m £m £m Borrowings –– within 1 year 504 504 544 544 –– after more than 1 year 1,573 1,676 1,642 1,914 2,077 2,180 2,186 2,458

Bonds are classified as Level 1 in the Group’s hierarchy for determining and disclosing the fair value of financial instruments. Bond fair values are as quoted in the relevant fixed income markets. Bank borrowings and commercial paper are classified as Level 2 in the Group’s hierarchy for determining and disclosing the fair value of financial instruments. The fair values of these instruments are based on discounted cash flows using a rate based on borrowing cost. Bank borrowings bear interest at an appropriate inter-bank reference rate plus and agreed margin, and commercial paper attracts interest at a negotiated rate at the time of issuance. The carrying amounts of the Group’s borrowings are denominated in the following currencies:

2019 2018 Drawn Swapped Effective Drawn Swapped Effective Currency £m £m £m £m £m £m Sterling 420 – 420 572 (270) 302 Euro 1,557 (637) 920 1,631 (361) 1,270 US Dollar 108 637 745 – 631 631 Total 2,085 – 2,085 2,203 – 2,203

The carrying amounts of the Company’s borrowings are denominated in the following currencies:

2019 2018 Drawn Swapped Effective Drawn Swapped Effective Currency £m £m £m £m £m £m Sterling 420 – 420 572 (270) 302 Euro 1,549 (637) 912 1,614 (361) 1,253 US Dollar 108 637 745 – 631 631 Total 2,077 – 2,077 2,186 – 2,186

London Stock Exchange Group plc Annual Report 31 December 2019 193 Notes to the financial statements (continued)

27. Analysis of net debt Group net debt includes interest bearing loans and borrowings and derivative financial instruments less cash and cash equivalents.

Group Company 2019 2018 2019 2018 £m £m £m £m Due within 1 year Cash and cash equivalents 1,493 1,510 2 6 Bank borrowings (256) (41) (248) (24) Commercial paper (256) (270) (256) (270) Bonds – (250) – (250) Derivative financial assets 2 – 2 – Derivative financial liabilities (1) (30) (1) (30) 982 919 (501) (568) Due after 1 year Bonds (1,573) (1,642) (1,573) (1,642) Derivative financial liabilities (39) (17) (39) (17) Total net debt (630) (740) (2,113) (2,227)

Reconciliation of net cash flow to movement in net debt

Group Company 2019 2018 2019 2018 £m £m £m £m Increase/(decrease) in cash in the year 57 84 (8) 1 Bond issue proceeds – (445) – (445) Commercial paper issuance – (255) – (255) Additional drawdowns from bank credit facilities (261) – (261) – Net repayments made towards bank credit facilities 35 489 26 474 Repayment of bonds 250 – 250 – Change in net debt resulting from cash flows 81 (127) 7 (225) Foreign exchange 14 4 92 (40) Movement on derivative financial assets and liabilities 9 (22) 9 (22) Bond valuation adjustment (2) 3 (2) 3 Movement in bank credit facility arrangement fees 8 (1) 8 (1) Net debt at the start of the year (740) (597) (2,227) (1,942) Net debt at the end of the year (630) (740) (2,113) (2,227)

28. Provisions

Property Other Total Group £m £m £m 31 December 2018 10 2 12 Impact of adoption of IFRS 16 (note 2) 4 – 4 1 January 2019 (restated) 14 2 16 Utilised during the year – (2) (2) Provisions no longer required – (2) (2) Provided in the year – 20 20 31 December 2019 14 18 32 Current 1 18 19 Non-current 13 – 13 31 December 2019 14 18 32

The property provision represents the estimated net present value of future costs for dilapidation costs. On adoption of IFRS 16 on 1 January 2019, additional provisions were recognised (note 2).

The majority of the non-current provisions are expected to be due in 2024.

Other provisions primarily relate to the expected costs arising from restructuring during the year.

The Company has no provisions (2018: nil).

London Stock Exchange Group plc 194 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

29. Share capital and share premium Ordinary shares issued and fully paid

Number of Ordinary Share shares shares1 premium Total millions £m £m £m 1 January 2018 350 24 964 988 Issue of shares to the Employee Benefit Trust 1 – 1 1 31 December 2018 351 24 965 989 Issue of shares to the Employee Benefit Trust – – 2 2 31 December 2019 351 24 967 991

79 1. Ordinary Shares of 6 ⁄86 pence

79 The Board approved the allotment and issue of 68,020 ordinary shares of par value 6 ⁄86 pence at a weighted average exercise price of 2,238 pence to the Employee 79 Benefit Trust (2018: 72,763 ordinary shares of par value 6 ⁄86 pence at 2,042 pence), to settle employee ‘Save As You Earn’ share plans. This generated a premium of £2 million (2018: £1 million).

The Ordinary Share Capital of 351 million shares is shown net of 1 million treasury shares, recorded at par.

30. Net cash flow generated from operations

Group Company 2019 2018 2019 2018 Notes £m £m £m £m Profit before tax 651 685 268 112 Adjustments for depreciation, amortisation and impairments: Depreciation and amortisation 13, 14 369 287 – – Impairment of software and intangible assets 14 24 5 – – Impairment of property, plant and equipment 13 2 2 – – Adjustments for other non-cash items: Loss on disposal of intangible assets 2 – – – Share of loss of associates 15 7 8 – – Impairment of investment in associate 15 – – 6 8 Net finance expense 9 87 66 83 61 Share scheme expense 7 35 36 – – Royalties 1 3 – – Movement in pensions and provisions (2) (19) – – Net foreign exchange differences (27) 30 (103) 52 Dividend income 34 – – (464) (320) Research and development tax credit (1) – – –

Decrease/(increase) in receivables and contract assets 203 (107) (18) 38 Increase in payables and contract liabilities 37 3 39 66

Movement in other assets and liabilities relating to operations: Decrease/(increase) in clearing member financial assets 6,525 (101,678) – – (Decrease)/increase in clearing member financial liabilities (6,796) 101,646 – – Movement in derivative assets and liabilities1 (28) 2 (7) 22 Cash generated from/(used in) operations 1,089 969 (196) 39 1. Movement in derivative assets and liabilities includes £10 million relating to the Group’s exercise of its option to purchase the remaining interest in EuroTLX SIM S.p.A, a subsidiary of the Group and £1 million from the revaluation of the derivative option attached to the convertible loan to Nivaura Limited.

Movement in financial liabilities arising from financing activities:

Impact of adoption of 1 January Cash flows 31 December IFRS 16 2019 from financing Acquisition Foreign Other 31 December 2018 (note 2) (restated) activities activities exchange movements 2019 £m £m £m £m £m £m £m £m Bank borrowings 41 – 41 226 (19) (4) 12 256 Bonds 1,892 – 1,892 (250) – (71) 2 1,573 Commercial paper 270 – 270 – – (14) – 256 Finance lease liabilities 5 201 206 (41) 1 (2) 19 183 2,208 201 2,409 (65) (18) (91) 33 2,268

Other movements comprise non-cash movements relating to amortisation of arrangement fees of £14 million, new leases recognised of £20 million and leases terminated early of £(1) million during the year. Acquisition activities include arrangement fees of £19 million paid on funding arrangements, which have been disclosed as part of interest paid within the Group’s cash flows from operating activities.

London Stock Exchange Group plc Annual Report 31 December 2019 195 Notes to the financial statements (continued)

Cash flows 31 December from financing Foreign Other 31 December 2017 activities exchange movements 2018 £m £m £m £m £m Bank borrowings 522 (489) 7 1 41 Bonds 1,431 445 18 (2) 1,892 Commercial paper – 255 15 – 270 Finance lease liabilities 7 (2) – – 5 1,960 209 40 (1) 2,208

The comparative table has been re-presented to be in line with current year disclosure. 31. Commitments and contingencies The Group and Company have no contracted capital commitments or any other commitments not provided for in the financial statements as at 31 December 2019 (2018: nil).

In the normal course of business, the Group and the Company receive legal claims in respect of commercial, employment and other matters. Where a claim is more likely than not to result in an economic outflow of benefits from the Group or the Company, a provision is made representing the expected cost of settling such claims.

32. Business combinations Acquisitions in the year to 31 December 2019 On 31 May 2019, the Group acquired 100% of Beyond Ratings, a provider of financial analysis that includes Environmental, Social and Governance criteria, based in France. The consideration of £14 million (€15 million) cash was paid in two instalments during the year.

The provisional fair value of the net assets acquired was nil, including fixed assets of £1 million, current assets of £1 million and liabilities of £2 million. The fair value of assets acquired will be finalised within 12 months of acquisition. There were no purchased intangible assets. The Group provisionally recognised £14 million in goodwill which represents the potential growth of future income streams expected as the Beyond Ratings business is highly complementary to the Group’s analytics tools and the index and data products.

The post-acquisition revenues and operating profit from the continuing operations of Beyond Ratings were not material to the Group. If the acquisition had taken place at the beginning of the year there would have been no material effect on the Group.

Acquisition related costs incurred have been recognised in the income statement during the year, but were immaterial.

Acquisitions in the year to 31 December 2018 There were no acquisitions in the year ended 31 December 2018.

33. Share schemes The London Stock Exchange Group Long Term Incentive Plan (LTIP), approved at the 2014 AGM, has two elements, a conditional award of Performance Shares and an award of Matching Shares linked to investment by the executive of annual bonus in the Company’s shares – the latter element is not applicable to executive directors. Vesting of these awards is dependent upon the Company’s total shareholder return performance and adjusted basic earnings per share. Further details are provided in the Directors' Remuneration Report on pages 98 to 128. Awards are granted at nil cost to employees.

The SAYE Option Scheme and International Sharesave Plan (SAYE Scheme) provide for grants of options to employees who enter into a SAYE savings contract and options were granted at 20% below fair market value during the year.

The Group has an employee benefit discretionary trust to administer the share plans and to acquire the shares to meet commitments to Group employees. At the year end, 517,563 (2018: 573,672) shares were held by the trust, funded in part by an interest free loan from the Group and in part by the issue of 68,020 (2018: 72,763) shares and transfer of 1,505,267 (2018: 1,359,900) shares held in treasury.

The Company has no employees but, in accordance with IFRS 10 ‘Consolidated Financial Statements’, has the obligation for the assets, liabilities, income and costs of the employee benefit trust and these have been consolidated in the Group’s financial statements. The cost of the Group’s shares held by the trust are deducted from retained earnings.

London Stock Exchange Group plc 196 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Movements in the number of share options and awards outstanding and their weighted average exercise prices are as follows:

Share options SAYE Scheme LTIP

Weighted Weighted Weighted average average average exercise price exercise price exercise price Number £ Number £ Number £ 31 December 2017 1,676 8.94 867,873 26.40 5,438,872 – Granted – – 208,598 34.37 1,335,947 – Exercised – – (206,738) 20.59 (1,659,249) – Lapsed/forfeited – – (76,746) 27.88 (320,648) – 31 December 2018 1,676 8.94 792,987 29.87 4,794,922 – Granted – – 207,202 38.46 1,135,926 – Exercised – – (195,424) 23.01 (1,496,293) – Lapsed/forfeited – – (69,556) 32.33 (495,157) – 31 December 2019 1,676 8.94 735,209 33.88 3,939,398 –

Exercisable at: 31 December 2019 1,676 8.94 11,057 32.59 – – 31 December 2018 1,676 8.94 9,940 28.05 – –

The weighted average share price of London Stock Exchange Group plc shares during the year was £58.75 (2018: £42.62).

The range of exercise prices and weighted average remaining contractual life of awards and options outstanding are as follows:

31 December 2019 31 December 2018 Weighted Weighted average average remaining remaining contractual contractual Number life Number life outstanding Years outstanding Years Share options Between £8 and £9 1,676 – 1,676 –

SAYE Between £20 and £30 – – 188,218 0.1 More than £30 735,209 1.4 604,769 1.6

LTIP Nil 3,939,398 1.2 4,794,922 1.2 Total 4,676,283 1.2 5,589,585 1.3

The fair value of share awards and share options granted during the year was determined using a stochastic valuation model. The key assumptions used in the valuation were as follows:

Performance Shares Matching Shares Restricted Share Award Share Save Plan 22-Mar-19 29-Aug-19 28-Nov-19 22-Mar-19 22-Mar-19 29-Aug-19 28-Nov-19 01-May-19

Grant date share price £45.94 £69.70 £68.98 £45.94 £45.94 £69.70 £68.98 £51.86

0.95 year to 2 years to 0.33 year to Expected life 3 years 3 years 3 years 3 years 2.95 years 3 years 4.33 years 3.3 years

£38.46 to Exercise price n.a. n.a. n.a. n.a. n.a. n.a. n.a. £39.37

Dividend yield 1.5% 1.1% 0.9% 1.5% 1.5% 1.1% 0.9% 1.3%

0.65% to 0.33% to 0.49% to Risk-free interest rate 0.7% 0.3% 0.5% 0.7% 0.72% 0.43% 0.74% 0.8%

18.2% to 20% to 21% to Volatility 20% 20% 21% 20% 20.3% 21.4% 39.1% 23%

£44 to £67.40 to £66.28 to £14.41 to Fair value – – – – £45.31 £68.16 £68.77 £15.00

Fair value TSR £13.69 £27.09 £20.00 £13.69 n.a. n.a. n.a. n.a.

£66.90 to Fair value EPS £43.97 £67.40 £67.10 £43.97 n.a. n.a. n.a. n.a.

London Stock Exchange Group plc Annual Report 31 December 2019 197 Notes to the financial statements (continued)

The approach adopted by the Group in determining the fair value for the Performance and Matching Shares granted during the year was based on a Total Shareholder Return pricing model which incorporates TSR and EPS performance conditions and references the vesting schedules of the awards.

For all other share awards, including the Share Save Plan, the Black-Scholes model was used.

The significant inputs into both models are the share price at grant date, expected volatility, dividend yields and annual risk-free interest rate. The volatility assumption is based on the historical 3-year volatility as at the date of grant. The risk-free interest rate represents the yield available on a UK zero-coupon government bond on the date of grant for a term commensurate with the vesting period of the award. The expected life refers to the time from the date of grant to the date the awards vest. Holders of share awards and share options are not entitled to receive dividends declared during the vesting period.

34. Transactions with related parties Key management compensation Compensation for Directors of the Company and key personnel who have authority for planning, directing and controlling the Group:

2019 2018 £m £m Salaries and other short-term benefits 11 11 Pensions 1 1 Share-based payments 12 14 24 26

Key management compensation relates to the Executive Directors, Group Chair and Executive Committee, who have authority for planning, directing and controlling the Group.

Other directors’ interests One director has a 40.5% (2018: 40.5%) equity interest in Quantile Technologies Limited who are an approved compression service provider for the Group’s LCH Limited subsidiary. The Group operated a commercial arrangement with Quantile Technologies Limited and all transactions were carried out on an arm’s length basis. During the year the Group recognised income of £0.5 million and expenses of £0.4 million as part of the agreement (2018: nil).

Inter-company transactions with subsidiary undertakings The Company has loans with some subsidiary undertakings. Details as at 31 December 2019 are shown in the table below:

Amount (owed to)/ due from as at Interest (charge)/credit Interest rate as at Loan counterparty 2019 2018 Term 31 December 2019 2019 2018 London Stock Exchange plc £(203)m £(198)m 25 years from May 2006 with five LIBOR plus £(6)m £(5)m equal annual repayments 2% per annum commencing in May 2027. London Stock Exchange Employee Benefit Trust £41m £25m Repayable on demand. Non-interest – – bearing London Stock Exchange Group Holdings (Italy) €(206)m €(11)m Fifth anniversary of the EURIBOR plus €(2)m €(1)m Limited initial utilisation date 1.5% per annum which was April 2018. London Stock Exchange Group Holdings Limited £272m £226m Fifth anniversary of the LIBOR plus £9m £12m initial utilisation date 1.5% per annum which was October 2019. London Stock Exchange Reg Holdings Limited £24m £20m Fifth anniversary of the LIBOR plus – – initial utilisation date 1.2% per annum which was July 2018. London Stock Exchange (C) Limited €(40)m – Fifth anniversary EURIBOR plus – – of the initial utilisation date 1.5% per annum which was May 2017. London Stock Exchange Group Holdings US$(227)m US$(24)m Fifth anniversary LIBOR plus US$(2)m US$(3)m (Luxembourg) Ltd of the initial utilisation date 1.5% per annum which was November 2019. LSEG Employment Services Limited £34m £137m Fifth anniversary LIBOR plus £1m £2m of the initial utilisation date 1.2% per annum which was January 2015. London Stock Exchange Group (Services) Limited £197m £71m Fifth anniversary LIBOR plus £3m £2m of the initial utilisation date 0.9% per annum which was January 2016.

London Stock Exchange Group plc 198 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

During the year, the Company charged in respect of employee share schemes £10 million (2018: £9 million) to LSEG Employment Services Limited, £6 million (2018: £5 million) to LCH Group, £4 million (2018: £5 million) to the London Stock Exchange Group Holdings Italia S.p.A. group of companies, £4 million (2018: £3 million) to the FTSE Group, £5 million (2018: £7 million) to London Stock Exchange Group Holdings Inc, £4 million (2018: £5 million) to London Stock Exchange plc and £2 million (2018: £1 million) to other subsidiaries of the Group.

During the year the Company received dividends of £218 million from LSE plc, £155 million from LSE Group Holdings Ltd, £31 million from LSE Group Holdings (Italy) Ltd and £60 million from LSEGH (Luxembourg) Ltd. The Company recognised £7 million income (2018: £7 million) and £72 million expenses (2018: £61 million) with Group undertakings in relation to corporate recharges. At 31 December 2019, the Company had £25 million (2018: £67 million) other receivables due from Group companies and other payables of £78 million (2018: £144 million) owed to Group undertakings.

Transactions with associates In the year ended 31 December 2019, the Group recognised £1 million revenue (2018: £1 million) from its associates and as at 31 December 2019, the Group had £1 million receivable from its associates (2018: £1 million).

All transactions with subsidiaries and associates were carried out on an arm’s length basis.

35. Events after the reporting period In January 2020 the Group created a Post Trade Division. The division will include LCH Group and the post trade businesses in Italy, Monte Titoli and CC&G, which are currently reported separately as part of our financial results. The Post Trade division will also include UnaVista, the trade reporting business that currently sits in the Information Services Division.

The Group will disclose segmental information for the Post Trade Division in future financial reporting.

36. Other statutory information Auditors’ remuneration payable to Ernst and Young LLP and its associates comprise the following:

2019 2018 £m £m Audit of parent and consolidated financial statements 1 1 Audit of subsidiary companies 3 2 Non-audit services 1 1 Total 5 4

Ernst and Young LLP provided non-audit services of £0.4 million; 8% of total fees (2018: £0.6 million; 15% of total fees). This comprised of audit related assurance services of £0.3 million (2018: £0.5 million) and other non-audit services of £0.1 million (2018: £0.1 million).

Further details of the services provided by Ernst and Young LLP are given in the Report of the Audit Committee on pages 90 to 95.

Directors’ emoluments comprise the following:

2019 2018 £m £m Salary and fees 3 3 Performance bonus 3 2 Gains made on share awards 6 3 Benefits 1 1 13 9

During the year, one Director (2018: one) had retirement benefits accruing under a defined benefit scheme.

Further details of Directors’ emoluments are included in the Directors' Remuneration Report on pages 98 to 128.

London Stock Exchange Group plc Annual Report 31 December 2019 199 Notes to the financial statements (continued)

Related undertakings A list of the Group’s subsidiaries as at 31 December 2019 is given below including the percentage of each class held and the Group’s ownership percentages. The share ownership percentage records the percentage of each subsidiary’s share capital owned within the LSEG Group. Shares owned directly by LSEG plc are listed as being a ‘direct’ shareholding, shares owned by other LSEG Group companies are listed as an ‘indirect (group interest)’ shareholding. Where more than 1 LSEG Group company owns shares in a subsidiary these interests have been added together. The ultimate economic interest percentage on the other hand does not show actual share ownership. It records LSEG plc’s effective interest in the subsidiary, allowing for situations where subsidiaries are owned by partly owned intermediate subsidiaries. All subsidiaries are consolidated in the Group’s financial statements.

Identity of LSEG plc each class of ultimate share held in Share economic the subsidiary Direct or ownership interest Name of subsidiary undertaking Country of incorporation Registered office address undertaking indirect holding % % Banque Centrale de France 18 Rue du Quatre-Septembre, Ordinary Indirect 88.91 73.45 Compensation SA (LCH SA) 75002, Paris, France (group interest) Beyond Ratings France 58 Rue des Meuniers, 93100, Ordinary Indirect 100 100 Montreuil, France (group interest) BIt Market Services S.p.A. Italy Piazza degli Affari 6, 20123, Milano, Ordinary Indirect 99.99 99.99 Lombardia, Italy (group interest) Bondclear Limited England and Wales Aldgate House, 33 Aldgate High Street, Ordinary Indirect 100 82.61 London, England, EC3N 1EA (group interest) Borsa Italiana S.p.A. Italy Piazza degli Affari 6, 20123, Milano, Ordinary Indirect 99.99 99.99 Lombardia Italy (group interest) Cassa Di Compensazione Italy Via Tomacelli, 146, 00186 Rome, Italy Ordinary Indirect 100 99.99 e Garanzia S.p.A. (CC&G) (group interest) CommodityClear Limited England and Wales Aldgate House, 33 Aldgate High Street, Ordinary Indirect 100 82.61 London, England, EC3N 1EA (group interest) Elite Americas LLC United States c/o United Agent Group Inc. 3411 Silverside Road Member Indirect 100 74.99 Tatnall Building #104, Wilmington, New Castle Interest (group interest) County, DE, 19810, United States Elite Club Deal Limited England and Wales 10 Paternoster Square, Ordinary Indirect 100 74.99 London, England, EC4M 7LS (group interest) Elite S.p.A. Italy Piazza degli Affari 6, 20123, Milano, Ordinary Indirect 75.00 74.99 Lombardia, Italy (group interest) Elite SIM S.p.A. Italy Piazza degli Affari 6, 20123, Milano, Ordinary Indirect 100 74.99 Lombardia, Italy (group interest) Equityclear Limited England and Wales Aldgate House, 33 Aldgate High Street, Ordinary Indirect 100 82.61 London, England, EC3N 1EA (group interest) EuroMTS Limited England and Wales 10 Paternoster Square, Ordinary Indirect 100 62.53 London, England, EC4M 7LS (group interest) EuroTLX SIM S.p.A Italy Piazza degli Affari 6, 20123, Milano, Ordinary Indirect 100 99.99 Lombardia, Italy (group interest) ForexClear Limited England and Wales Aldgate House, 33 Aldgate High Street, Ordinary Indirect 100 82.61 London, England, EC3N 1EA (group interest) Frank Russell Company United States c/o United Agent Group Inc. West 505 Riverside Common Indirect 100 100 Avenue #500, Spokane, Spokane County, (group interest) WA, 99201, United States FTSE (Australia) Limited England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 London, England, EC4M 7LS (group interest) FTSE (Beijing) China Room 02D-H, 6/F Dongwai Diplomatic Building, Ordinary Indirect 100 100 Consulting Limited 23 Dongzhimenwai Dajie, Beijing, China (group interest) FTSE (Japan) Limited England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 London, England, EC4M 7LS (group interest) FTSE Americas, Inc. United States c/o United Agent Group Inc. 15 North Mill Street, Ordinary Indirect 100 100 Nyack, Rockland County, NY, 10960, United States (group interest) FTSE China Index Ltd Hong Kong Suite 1106-8, 11/F, Tai Yau Building, Ordinary Indirect 100 100 No.181 Johnston Road, Wanchai, Hong Kong (group interest) FTSE Fixed Income LLC Unites States c/o United Agent Group Inc. 3411 Silverside Road Member Indirect 100 100 Tatnall Building #104, Wilmington, New Castle Interest (group interest) County, DE, 19810, United States FTSE Global Debt Capital Canada 40 King Street West, Suite 5800, Toronto, Ordinary Indirect 100 100 Markets Inc. Ontario, M5H 3S1 (group interest) FTSE Global Debt Capital England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 Markets Limited London, England, EC4M 7LS (group interest) FTSE International England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 (France) Limited London, England, EC4M 7LS (group interest) FTSE International Hong Kong Suite 1106-8, 11/F, Tai Yau Building, Ordinary Indirect 100 100 (Hong Kong) Limited No.181 Johnston Road, Wanchai, Hong Kong (group interest) FTSE International England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 (Italy) Limited London, England, EC4M 7LS (group interest) FTSE International United Arab Emirates Unit 15501, Level 15, Gate Building, DIFC, Ordinary Indirect 100 100 (MEA) Ltd PO Box 121208, Dubai, United Arab Emirates (group interest) FTSE International Brasil Brazil Edificio Argentina, Praia de Botafogo 228, Ordinary Indirect 100 100 Representacoes LTDA 16 andar, Sala1617, Rio de Janeiro, Brazil (group interest)

London Stock Exchange Group plc 200 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Identity of LSEG plc each class of ultimate share held in Share economic the subsidiary Direct or ownership interest Name of subsidiary undertaking Country of incorporation Registered office address undertaking indirect holding % % FTSE International Limited England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 London, England, EC4M 7LS (group interest) FTSE International Taiwan 26F.-1, No. 100, Song Ren Road, Xinyi Dist., Ordinary Indirect 100 100 Taiwan Limited Taipei City (group interest) FTSE Italy S.p.A. Italy Piazza degli Affari 6, 20123, Milano, Ordinary Indirect 100 100 Lombardia. Italy (group interest) FTSE Mexico Sociedad de Mexico Privada Paseo de los Tamarindos 120, Torre 3, Ordinary Indirect 100 100 Responsabilidad Limitada Dep. 1103, Col. Bosques de las Lomas, Mexico City, (group interest) de Capital Variable C.P. 05120, Mexico Gatelab Limited England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 London, England, EC4M 7LS (group interest) Gatelab S.r.l. Italy Via dei Pentri, 161, 86170, Isernia, Italy Ordinary Indirect 100 100 (group interest) globeSettle s.a.r.l. Luxembourg 19 Rue De Bitbourg, Ordinary Indirect 100 100 L-1273, Luxembourg (group interest) International Commodities England and Wales Aldgate House, 33 Aldgate High Street, Ordinary Indirect 100 82.61 Clearing House Limited London, England, EC3N 1EA (group interest) Intrinsic Research Systems Inc. United States c/o United Agent Group Inc. 3411 Silverside Road Ordinary A Indirect 100 100 Tatnall Building #104, Wilmington, New Castle (group interest) County, DE, 19810, United States Ordinary B Indirect 100 100 (group interest) LCH Limited England and Wales Aldgate House, 33 Aldgate High Street, Ordinary Indirect 100 82.61 London, England, EC3N 1EA (group interest) LCH Group Holdings Limited England and Wales Aldgate House, 33 Aldgate High Street, Ordinary 82.61 82.61 London, England, EC3N 1EA (Voting) Ordinary 100 – (Non-Voting) LCH.Clearnet LLC United States c/o United Agent Group Inc. 3411 Silverside Road Units Indirect 100 82.61 Tatnall Building #104, Wilmington, New Castle (group interest) County, DE, 19810, United States LCH.Clearnet Group Limited England and Wales Aldgate House, 33 Aldgate High Street, Ordinary Indirect 100 82.61 London, England, EC3N 1EA (group interest) LCH Pensions Limited England and Wales Aldgate House, 33 Aldgate High Street, Ordinary Indirect 100 82.61 London, England, EC3N 1EA (group interest) London Stock Exchange (C) England and Wales 10 Paternoster Square, £ Ordinary Direct 100 100 Limited London, England, EC4M 7LS € Ordinary Direct 100 – London Stock Exchange England and Wales 10 Paternoster Square, Partnership Indirect 100 100 Connectivity Solutions LP London, England, EC4M 7LS (group interest) London Stock Exchange England and Wales 10 Paternoster Square, Ordinary Direct 100 100 Group (Services) Limited London, England, EC4M 7LS London Stock Exchange England and Wales 10 Paternoster Square, Ordinary Direct 100 100 Group Holdings (Italy) Limited London, England, EC4M 7LS London Stock Exchange England and Wales 10 Paternoster Square, Ordinary Direct 100 100 Group Holdings (R) Limited London, England, EC4M 7LS London Stock Exchange Italy Piazza degli Affari 6, 20123, Milano, Ordinary Indirect 100 100 Group Holdings Italia S.p.A Lombardia, Italy (group interest) London Stock Exchange England and Wales 10 Paternoster Square, Ordinary Direct 100 100 Group Holdings Limited London, England, EC4M 7LS London Stock Exchange England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 LEI Limited London, England, EC4M 7LS (group interest) London Stock Exchange Plc England and Wales 10 Paternoster Square, Ordinary Direct 100 100 London, England, EC4M 7LS London Stock Exchange England and Wales 10 Paternoster Square, Ordinary Direct 100 100 Reg Holdings Limited London, England, EC4M 7LS LSEG (F) Limited England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 London, England, EC4M 7LS (group interest) LSEG F1 Limited England and Wales 10 Paternoster Square, Ordinary Direct 100 100 London, England, EC4M 7LS LSEG F2 Limited England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 London, England, EC4M 7LS (group interest) LSEG HK Financing Limited Hong Kong Suite 1106-8, 11/F, Tai Yau Building, Ordinary Indirect 100 100 No.181 Johnston Road, Wanchai, Hong Kong (group interest) LSEG (M) Financing Limited England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 London, England, EC4M 7LS (group interest) LSEG Business Services Sri Lanka Trace Expert City, Maradana, Ordinary Indirect 100 100 Colombo (Private) Limited Colombo 10, Sri Lanka (group interest) LSEG Business England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 Services Limited London, England, EC4M 7LS (group interest)

London Stock Exchange Group plc Annual Report 31 December 2019 201 Notes to the financial statements (continued)

Identity of LSEG plc each class of ultimate share held in Share economic the subsidiary Direct or ownership interest Name of subsidiary undertaking Country of incorporation Registered office address undertaking indirect holding % % LSEG (ELT) Limited England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 London, England, EC4M 7LS (group interest) LSEG Business Services Romania 6F Iuliu Maniu Blvd, Building 6.1, Ordinary Indirect 100 100 RM S.R.L 3rd – 4th floor, District 6, Bucharest, Romania (group interest) LSEG Employment England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 Services Limited London, England, EC4M 7LS (group interest) LSEG Information United States c/o United Agent Group Inc. 3411 Silverside Road Ordinary Indirect 100 100 Services (US), Inc. Tatnall Building #104, Wilmington, (group interest) New Castle County, DE, 19810, United States LSEG Ireland Limited Ireland 10 Earlsfort Terrace, Dublin, Ordinary Indirect 100 100 D02 T380, Ireland (group interest) LSEG Ireland 2 Limited Ireland 1 Stokes Place, St Stephen’s Green, Ordinary Indirect 100 100 Dublin 2, D02 DE03, Ireland (group interest) LSEG Ireland 3 Limited Ireland 1 Stokes Place, St Stephen’s Green, Ordinary Indirect 100 100 Dublin 2, D02 DE03, Ireland (group interest) LSEG LuxCo 1 S.a.r.l Luxembourg 19 Rue De Bitbourg, L-1273, Luxembourg Ordinary Indirect 100 100 (group interest) LSEG LuxCo 2 S.a.r.l Luxembourg 19 Rue De Bitbourg, L-1273, Luxembourg Ordinary Indirect 100 100 (group interest) LSEG Malaysia Sdn. Bhd. Malaysia Level 19-1, Menara Milenium, Ordinary Indirect 100 100 Jalan Damanlela, Pusat Bandar Damansara, (group interest) W.P. Kuala Lumpur, 50490, Malaysia LSEG Pension England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 Trustees Limited London, England, EC4M 7LS (group interest) LSEG Technology Limited England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 London, England, EC4M 7LS (group interest) LSEG US Holdco, Inc United States c/o United Agent Group Inc. 3411 Silverside Road Common Direct 100 100 Tatnall Building #104, Wilmington, New Castle County, DE, 19810, United States LSEGA Inc. United States c/o United Agent Group Inc. 3411 Silverside Road Common Direct 100 100 Tatnall Building #104, Wilmington, New Castle County, DE, 19810, United States LSEGA Jersey Limited Jersey 47 Esplanade, St Helier, JE1 0BD, Jersey Ordinary Direct 100 100 LSEGA Limited England and Wales 10 Paternoster Square, Ordinary Direct 100 100 London, England, EC4M 7LS LSEGA2 Limited England and Wales 10 Paternoster Square, Ordinary Direct 100 100 London, England, EC4M 7LS LSEGH (I) LLC United States c/o United Agent Group Inc. 3411 Silverside Road Ordinary Indirect 100 100 Tatnall Building #104, Wilmington, New Castle (group interest) County, DE, 19810, United States LSEGH (Luxembourg) Limited England and Wales 10 Paternoster Square, Ordinary Direct 100 100 London, England, EC4M 7LS LSEGH Inc. United States c/o United Agent Group Inc. 3411 Silverside Road Ordinary Indirect 100 100 Tatnall Building #104, Wilmington, New Castle (group interest) County, DE, 19810, United States LSEGH US PT, Inc. United States c/o United Agent Group Inc. 3411 Silverside Road Common Direct 100 100 Tatnall Building #104, Wilmington, New Castle County, DE, 19810, United States Marché de Titres France France 18 Rue du Quatre-Septembre, 75002, Ordinary Indirect 100 62.53 (MTS France) Paris, France (group interest) M-CCP Holdings, Inc. United States c/o United Agent Group Inc. 3411 Silverside Road Ordinary Indirect 100 100 Tatnall Building #104, Wilmington, New Castle (group interest) County, DE, 19810, United States M-CCP Parent, Inc. United States c/o United Agent Group Inc. 3411 Silverside Road Ordinary Indirect 100 100 Tatnall Building #104, Wilmington, New Castle (group interest) County, DE, 19810, United States Mergent Japan K.K. Japan 1-5-1, Otemachi First Square East Tower 11F, Ordinary Indirect 100 100 Otemachi, Chiyoda-ku, Tokyo, 1-5-1 (group interest) Mergent, Inc. United States c/o United Agent Group Inc. 3411 Silverside Road Ordinary Indirect 100 100 Tatnall Building #104, Wilmington, New Castle (group interest) County, DE, 19810, United States Millennium Information India 83 - C, Mittal Towers, Nariman Point, Ordinary Indirect 100 100 Technologies (India) Mumbai - 400 021, India (group interest) (Private) Limited Millennium IT (USA) Inc. United States c/o United Agent Group Inc. 3411 Silverside Road Common Indirect 100 100 Tatnall Building #104, Wilmington, New Castle (group interest) County, DE, 19810, United States Millennium IT Services Sri Lanka 65/2, Sir Chittampalam A Gardiner Mawatha, Ordinary Indirect 100 100 (Private) Limited Colombo 02, Sri Lanka (group interest) Millennium IT Software Canada Suite 2400, 333 Bay Street, Toronto, Common Indirect 100 100 (Canada) Inc. Ontario, Canada (group interest)

London Stock Exchange Group plc 202 Annual Report 31 December 2019 Group financial statements Notes to the financial statements

Identity of LSEG plc each class of ultimate share held in Share economic the subsidiary Direct or ownership interest Name of subsidiary undertaking Country of incorporation Registered office address undertaking indirect holding % % Millennium IT Software Sri Lanka No.01 Millennium Drive, Malabe, Ordinary Indirect 100 100 (Private) Limited Sri Lanka (group interest) Monte Titoli S.p.A. Italy Piazza degli Affari 6, 20123, Milano, Ordinary Indirect 98.88 98.87 Lombardia, Italy (group interest) MTS S.p.A. Italy Via Tomacelli, 146, 00186 Rome, Italy Ordinary Indirect 62.53 62.53 (group interest) MTS Markets United States c/o United Agent Group Inc. 3411 Silverside Road Ordinary Indirect 100 62.53 International Inc. Tatnall Building #104, Wilmington, New Castle (group interest) County, DE, 19810, United States MTSNext Limited England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 London, England, EC4M 7LS (group interest) Repoclear Limited England and Wales Aldgate House, 33 Aldgate High Street, Ordinary Indirect 100 82.61 London, England, EC3N 1EA (group interest) SSC Global Business England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 Services Limited London, England, EC4M 7LS (group interest) Stock Exchange (Holdings) England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 Limited (The) London, England, EC4M 7LS (group interest) SwapAgent Limited England and Wales Aldgate House, 33 Aldgate High Street, Ordinary Indirect 100 82.61 London, England, EC3N 1EA (group interest) Swapclear Limited England and Wales Aldgate House, 33 Aldgate High Street, Ordinary Indirect 100 82.61 London, England, EC3N 1EA (group interest) The London Clearing House England and Wales Aldgate House, 33 Aldgate High Street, Ordinary Indirect 100 82.61 Limited London, England, EC3N 1EA (group interest) London Produce Clearing England and Wales Aldgate House, 33 Aldgate High Street, Ordinary Indirect 100 82.61 House Limited (The) London, England, EC3N 1EA (group interest) The London Stock Exchange England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 Retirement Plan Trustee London, England, EC4M 7LS (group interest) Company Limited The Yield Book, Inc. United States c/o United Agent Group Inc. 3411 Silverside Road Common Indirect 100 100 Tatnall Building #104, Wilmington, New Castle (group interest) County, DE, 19810, United States Turquoise Global Netherlands Suite 108, Nieuwezijds Voorburgwal 162, Ordinary Indirect 100 51.36 Holdings Europe B.V. Amsterdam, 1012 SJ, Netherlands (group interest) Turquoise Global England and Wales 10 Paternoster Square, Ordinary A Indirect 100 51.36 Holdings Limited London, England, EC4M 7LS (group interest) Ordinary B – – – Turquoise Global United States c/o United Agent Group Inc. 3411 Silverside Road Ordinary Indirect 100 51.36 Holdings US, Inc. Tatnall Building #104, Wilmington, New Castle (group interest) County, DE, 19810, United States Unavista Limited England and Wales 10 Paternoster Square, Ordinary Indirect 100 100 London, England, EC4M 7LS (group interest) UnaVista TRADEcho B.V. Netherlands Suite 108, Nieuwezijds Voorburgwal 162, Ordinary Indirect 100 100 Amsterdam, 1012 SJ, Netherlands (group interest) Yield Book Software United States c/o United Agent Group Inc. 3411 Silverside Road Member Indirect 100 100 BRE LLC Tatnall Building #104, Wilmington, New Castle Interest (group interest) County, DE, 19810, United States Yield Book Tangible United States c/o United Agent Group Inc. 3411 Silverside Road Member Indirect 100 100 Property BRE LLC Tatnall Building #104, Wilmington, New Castle Interest (group interest) County, DE, 19810, United States

The Group’s associate undertakings were:

Identity of Share each class of ownership % Group share held in held by the ultimate the subsidiary Direct or Parent economic Associate name Country of incorporation undertaking indirect holding Company interest % AcadiaSoft, Inc. United States c/o The Corporation Trust Company, Convertible Indirect 15.67 15.67 1209 Orange Street, Wilmington, New Castle, Preferred (group interest) 19801 United States Curve Global Limited England and Wales 10 Paternoster Square, Ordinary A Direct 43.99 44.05 London, England, EC4M 7LS Ordinary B Direct 46.01 – Ordinary C – – – MTS Associated Markets S.A. Belgium Rue des Comédiens, 16-22, Ordinary Indirect 23.3 14.57 1000 Brussels, Belgium (group interest) The Hub Exchange Limited England and Wales 843 Finchley Road, London, Ordinary Indirect 30.03 22.52 England, NW11 8NA (group interest)

All associates have the same year end as The Group, with the exception of the Hub Exchange Limited which has a 31 January year end.

London Stock Exchange Group plc Annual Report 31 December 2019 203 Glossary

AIM Depositary Receipts/Global Depositary Receipts (GDR) The Group’s market for smaller and growing companies established in London Tradable certificates representing ownership of a number of underlying shares, and in Italy as AIM Italia mainly for companies in developing or emerging markets

Beyond Ratings Derivatives LSEG completed the acquisition of Beyond Ratings in 2019. Beyond Ratings is Tradable financial instruments whose value is determined by the value of a provider of ESG data and analytics for fixed income investors underlying instruments; this could be equity, an index, a commodity or any other tradable instrument Borsa Italiana (BIt) ––Exchange traded derivatives (ETD) Listed derivatives traded on an electronic Borsa Italiana S.p.A., the Group’s Italian exchange business trading venue such as an exchange and cleared through a clearing house Bridge Facility ––Over the counter (OTC) Derivatives are negotiated privately between two A committed, term loan facility comprising a tranche of US$9.325 billion and parties and may be cleared through a clearing house a tranche of €3.580 billion EBITDA Earnings before interest, tax, depreciation and amortisation CAGR Compound annual growth rate European Market Infrastructure Regulation (EMIR) European legislation on regulation of clearing of derivatives, and the operation CCP and governance of CCPs and trade repositories Central Counterparty – stands between two parties to a trade to eliminate counterparty risk by ensuring that settlement takes place European Benchmark Regulation (EU BMR) European regulation on indices used as benchmarks in financial instruments CC&G and financial contracts or to measure the performance of investment funds. Cassa di Compensazione e Garanzia S.p.A., the Group’s Italian subsidiary which It applied from 1 January 2018 manages the Italian CCP for equity, derivative, commodity and fixed income trades ELITE An international programme and platform to help ambitious companies CDSClear prepare and structure for further growth and investment, while providing LCH’s over-the-counter credit default swap (CDS) clearing service these businesses access to an extensive community of advisers, investors and business leaders Central Securities Depository (CSD) An entity that enables securities to be processed, settled and held in custody ELITE Club Deal An online private placement platform designed to streamline the capital Central Securities Depositories Regulation (CSDR) raising process for companies EU regulations framework to harmonise CSD operations ESOP Company or LSEG or London Stock Exchange Group Employee Share Option Plan London Stock Exchange Group plc and its subsidiaries ETP CONSOB Exchange traded products including ETFs and ETCs Commissione Nazionale per le Società e la Borsa, Italy’s official body for ––Exchange Traded Fund (ETF) – low-cost and flexible investments that track regulating and supervising companies and trading infrastructure providers indices and sectors CPI €STR Consumer Price Index which measures changes in the price of consumer goods The Risk Free Rate for Euro markets, published from October 2019 and services purchased by households EuroTLX CurveGlobal The Group’s 70% subsidiary which owns and operates a European MTF for the An interest rate derivatives venture between LSEG and a number of major dealer trading of fixed income securities in retail-size and investment products banks together with Cboe distributed to retail clients Dark Pool FCA Electronic trading networks developed by regulated venues such as Regulated Financial Conduct Authority, the current regulator of conduct of providers of Markets, MTFs and by OTC broker dealers to enable the matching of orders financial services in the UK and of UK trading venues such as Recognised between buyers and sellers without pre-trade transparency (non-displayed) until Investment Exchanges (RIEs) and MTFs the trade is complete

London Stock Exchange Group plc 204 Annual Report 31 December 2019 Shareholder information Glossary

ForexClear LCH Spider LCH’s over-the-counter foreign exchange clearing service Portfolio margining tool for cleared OTC products and listed interest rate futures

FTSE Group or FTSE Russell Legal Entity Identifiers (LEI) FTSE International Limited and its subsidiaries, the Group subsidiary that is The Legal Entity Identifier (LEI) initiative is designed to create a global reference a leading global provider of index and analytics solutions data system that uniquely identifies every legal entity or structure, in any jurisdiction, that is party to a financial transaction FTSE 100 Index The index developed by FTSE of leading UK quoted companies LSE London Stock Exchange plc FTSE MIB Index The index developed by FTSE of leading Italian quoted companies LSEG London Stock Exchange Group plc Global Equity Segment (GES) Segment of London Stock Exchange Main Market that allows trading in LSEG Business Services Limited (BSL) international companies on LSE during London trading hours Our shared services company providing a range of technology and corporate functions Group-wide Green Economy Mark Mark recognising equity issuers on London Stock Exchange with Main Market 50% or more green revenues The market for companies which have been admitted to trading on the London Stock Exchange’s principal market; and in Italy, the market for companies listed Group on Borsa Italiana’s principal MTA market The Company and its Group undertakings Mergent Inc. Group undertakings LSEG completed the acquisition of Mergent Inc., a provider of business and Group undertakings shall be construed in accordance with section 1161 of the financial data on public and private companies, in January 2017 and has been Companies Act 2006 and, in relation to the Company integrated within FTSE Russell

International Central Securities Depository (ICSD) MiFID or Markets in Financial Instruments Directive An entity that enables international securities to be processed, settled and EU Directive introduced in November 2007 to harmonise cross-border trading of held in custody equities, providing greater choice of trading venues

IDEM MiFID II The Group’s Italian Derivatives Market, trading contracts based on equities The revised MiFID and the accompanying Markets in Financial Instruments and related indices Regulation – better known as MiFID II and MiFIR – came into effect across all EU member states from January 2018. MiFID II is intended to build on the IOB achievements of MiFID I, with the aim of making financial markets more open, International Order Book – the Group’s electronic trading service for efficient, resilient and transparent international securities Millennium Exchange International Organisation of Securities Commission (IOSCO) MillenniumIT’s multi-asset trading platform, deployed for the UK, Italian and IOSCO sets out recommendations ‘Principles for Financial Benchmarks’, with the Turquoise equities markets objective to address conflicts of interest in the benchmark-setting process, enhance the reliability of benchmark determinations, and promote transparency MillenniumIT and openness Millennium Information Technologies (Pvt) Limited, the Group’s subsidiary that is the developer of flexible, low-cost, high performance trading platforms and IPO financial markets software serving both the Group’s own businesses and third Initial Public Offering – the process whereby companies join our markets and parties raise capital for the first time Millennium Surveillance LCH or LCH Group MillenniumIT’s financial markets surveillance system LCH Group Limited and its subsidiaries, the Group’s 82.6% owned global clearing and risk management business

London Stock Exchange Group plc Annual Report 31 December 2019 205 Glossary (continued)

Monte Titoli SETS Monte Titoli S.p.A., the Group’s Italian Central Securities Depository and The electronic order book operated by the London Stock Exchange for the trading settlement provider of the most liquid securities

MOT Smart Beta (also known as Factor indices) Mercato Obbligazionario Telematico is the Group’s Italian retail bond trading An alternative index-based methodology that seeks to enhance portfolio returns platform or reduce portfolio risk, or both. Smart beta indices have rules-based strategies designed to provide focused exposure to specific factors, market segments or MTS investment strategies. These may include volatility indices, defensive and high MTS S.pA., the Group’s 62.53% subsidiary which owns and operates an electronic dividend yield indices, or a combination of fundamentals trading platform for European and US fixed income securities Sustainable Bond Market (SBM) Multilateral Trading Facility (MTF) A dedicated segment of London Stock Exchange for social and sustainable bonds Alternative electronic trading systems as categorised under MiFID SwapAgent Non-Executive Director (NED) LCH’s service designed to simplify the processing, margining and settlement of A Non-Executive Director (NED) is a member of the Board, who is not part non-cleared derivatives of the company’s executive management team SwapClear ORB LCH’s over-the-counter interest rate swap clearing service The Group’s UK Order Book for Retail Bonds TARGET2-Securities (T2S) OTC Initiative led by the European Central Bank to provide a platform for settlement Over-the-counter trades in financial instruments executed outside a Regulated of bonds and equities traded in the Eurozone Market or MTF – see also Derivatives Temporary Recognition Regime (TRR) Primary Market Regime of Bank of England which allows EU domiciled CCPs to continue to offer The listing of securities for the first time via an IPO or introduction of existing clearing services and activities in the UK if the UK leaves the EU with no securities implementation period, as a third country CCP, for up to three years extendable by HM Treasury in increments of 12 months Regulated Market A multilateral system which brings together multiple third party buying and The Yield Book selling in financial instruments in accordance with rules, authorised under The Yield Book provides fixed income analytics that enables market makers and provisions of MiFID institutional investors to perform portfolio analysis and risk management. LSEG acquired The Yield Book in August 2017 and incorporated it within FTSE Russell Repo Repurchase Agreement – the process of borrowing money by combining the sale Turquoise and subsequent repurchase of an asset, traded through MTS and cleared through Turquoise Global Holdings Limited, the Group’s 51.36% owned pan-European MTF CC&G or LCH equity trading subsidiary, a venture between the Group and 12 global investment bank clients RNS Regulatory News Service, the Group’s Primary Information Provider, for UnaVista dissemination of regulatory and non-regulatory news to the market The Group’s web-based matching, reconciliation and data integration engine that provides matching of post trade data in a simple, automated process and the RPI Trade Repository approved by ESMA under EMIR The Retail Price Index which measures inflation in the UK economy WGBI Secondary Market FTSE Russell’s World Government Bond Index which measures performance of The public market on which securities once issued are traded fixed rate local currency investment grade sovereign bonds

SEDOL The Group’s securities identification service

London Stock Exchange Group plc 206 Annual Report 31 December 2019 Shareholder information Investor Relations Investor relations

Shareholder services Financial calendar (provisional) Equiniti registrars Shareview service Preliminary Results (for year ending 31 December 2019) 28 February 2020 Shareholders who hold London Stock Exchange Group shares in certificated form or within an Equiniti Investment Account or ISA can access Shareview. Shareview AGM 21 April 2020 is a free service provided by our registrars, Equiniti. It may be accessed through Q1 Interim Management Statement (revenues only) 21 April 2020 the internet at: www.shareview.co.uk. Ex-dividend date for final dividend 30 April 2020

By creating a Shareview portfolio, shareholders will gain online access to Final dividend record date 01 May 2020 information about their London Stock Exchange Group shares and other Final dividend payment 27 May 2020 investments including: Half year end 30 June 2020 ––Direct access to information held for you on the share register Interim Results 31 July 2020 including share movements Financial year end 31 December 2020 ––A daily indicative valuation of all investments held in your portfolio Preliminary Results March 2021 ––A range of information and practical help for shareholders The financial calendar is updated on a regular basis throughout the year. To register at Shareview shareholders will need their shareholder reference (which can be found on your share certificate) and they will be asked to select their own Please refer to our website: www.lseg.com/investor-relations and click on personal identification number. A user ID will then be posted to them. the shareholder services section for up-to-date details.

If shareholders have any problems in registering their portfolio for the Shareview The Group’s AGM for the year ended 31 December 2019 will be held on service, contact Equiniti on 0371 384 2544. For calls from outside the UK, contact 21 April 2020 at Hilton London Bankside Hotel, Bear Lane, London SE1 0UH, Equiniti on +44 (0)121 415 7047. starting at 10:30am.

Group’s share price service To obtain share price information for London Stock Exchange Group plc, see our website at: www.lseg.com.

By clicking on the Investor Relations tab, you will find the Company’s share price, historical closing prices and volumes and an interactive share price graph.

Substantial Shareholders As at 28 February 2020 the Company had been notified of the following interests amounting to more than 3% in the issued share capital of the Company in accordance with DTR 5 of the FCA’s Disclosure Guidance and Transparency Rules: Qatar Investment Authority 10.3% BlackRock, Inc 6.9% The Capital Group Companies, Inc 6.8% Lindsell Train Limited 5.0%

London Stock Exchange Group plc Annual Report 31 December 2019 207 Investor Relations contacts

Investor Relations Registrar information London Stock Exchange Group plc Equiniti 10 Paternoster Square Aspect House London Spencer Road EC4M 7LS Lancing West Sussex For enquiries relating to shareholdings in London Stock Exchange Group plc: BN99 6DA Shareholder helpline: +44 (0)20 7797 3322. Email: [email protected] T +44 (0)371 384 2030 or +44 (0)121 415 7047 Lines open 8:30 to 17:30. Monday to Friday. Visit the Investor Relations section of our website for up-to-date information www.shareview.co.uk including the latest share price, announcements, financial reports and details of analysts and consensus forecasts: www.lseg.com/investor-relations. Independent auditors Ernst & Young LLP Registered office 25 Churchill Place London Stock Exchange Group plc Canary Wharf 10 Paternoster Square London London E14 5EY EC4M 7LS T +44 (0)20 7951 2000 Registered company number London Stock Exchange Group plc: 5369106 Principal legal adviser Freshfields Bruckhaus Deringer LLP 65 Fleet Street London EC4Y 1HS

T +44 (0)20 7936 4000

Corporate brokers Barclays 5 The North Colonnade Canary Wharf London E14 4BB

T +44 (0)20 7623 2323 www.barclays.com

RBC Capital Markets RBC Europe Limited Riverbank House 2 Swan Lane London EC4R 3BF

T +44 (0)20 7653 4000 www.rbccm.com

London Stock Exchange Group plc 208 Annual Report 31 December 2019 AIM, London Stock Exchange, London Stock Exchange Group, LSE, LSEG, the London Stock Exchange Beyond Ratings is a registered trademark of Beyond Ratings SAS. Coat of Arms Device, NOMAD, RNS, SEDOL, SEDOL Masterfile, SETS, TradElect, UnaVista, and IOB are registered trade marks of London Stock Exchange plc. Main Market, Specialist Fund Market, SFM, ORB, Millennium Exchange, Millennium Surveillance, Millennium CSD and Millennium PostTrade are High Growth Segment, Professional Securities Market and PSM are un-registered trade marks of registered trade marks of Millennium IT Software (Private) Limited. London Stock Exchange plc. Turquoise and Turquoise Plato are registered trade mark of Turquoise Global Holdings Limited. Curve Global is a registered trade mark of Curve Global Limited. Turquoise Plato Midpoint Continuous, Turquoise Plato Uncross, Turquoise Plato Block Discovery and Turquoise Plato Dark Lit Sweep un-registered trademarks of Turquoise Global Holdings Limited. Borsa Italiana, MTA, MIB, MOT, AGREX, IDEX, SEDEX and BIT EQ MTF are registered trade marks of Borsa Italiana S.p.A.. IDEM is an un-registered trade mark of Borsa Italiana S.p.A.. SwapClear, RepoClear, EquityClear, ForexClear and LCH are registered trade marks of LCH Limited.

CC&G is a registered trade mark of Cassa di Compensazione e Garanzia S.p.A.. CDSClear is a registered trade mark of LCH S.A..

Monte Titoli and X-TRM are registered trade marks of Monte Titoli S.p.A.. Other logos, organisations and company names referred to may be the trade marks of their respective owners. ELITE, E, ELITE Growth and ELITE Connect are registered trade marks of Elite S.p.A.. Designed by Superunion, London. www.superunion.com. Gatelab is a registered trade mark of Gatelab S.r.L.. Board and Executive Committee photography by Paul Hackett (www.paulhackett.co.uk), EuroMTS, MTS, the MTS logo and BOND VISION are registered trade marks of MTS S.p.A.. Nick Sinclair (www.nicksinclair.com) and Layton Thompson (www.laytonthompson.com).

EuroTLX is a registered trade mark of EuroTLX SIM S.p.A.. This report is printed on Vison Offset which is made of FSC® certified and other controlled material.

FTSE is a registered trade mark of the London Stock Exchange Group companies and is used by FTSE Printed sustainably in the UK by Pureprint, a Carbon Neutral company with FSC® Chain of custody International Limited under licence. and an ISO 14001-certified environmental management system recycling over 99% of all dry waste.

FTSE Russell is a registered trade mark of London Stock Exchange plc.

Russell, Russell Investments and Mountain Logo, Russell 1000, Russell 2000 and Russell 3000 are registered trade marks of Frank Russell Company.

Mergent is a registered trade mark of Mergent, Inc..

XTF is a registered trade mark of LSEG Information Services (US), Inc.

The Yield Book, Yield Book Q. the Funnel Logo, WGBI and WorldBIG are registered trade marks of The Yield Book Inc.. London Stock Exchange Group plc 10 Paternoster Square London EC4M 7LS Telephone +44 (0)20 7797 1000 Registered in England and Wales No. 5369106 www.lseg.com